• news-banner

    Expert Insights

New rules for non-doms: (too) short and sweet? Or not as simple as it sounds?

On 6 March 2024, radical changes were announced to the tax treatment of individuals who are resident in the UK for tax purposes, but who remain ‘domiciled’ outside the UK (‘non-doms’). If enacted as planned, the new rules would be in force from 6 April 2025. 

HM Treasury’s policy summary says the Government “wants the UK to have a fair and internationally competitive tax system, focused on attracting talented individuals and investment”. The changes seek to achieve this through a new regime which will be ‘short and sweet’: 

  • Short

Someone moving to the UK for the first time (or after 10 years of absence) can benefit from an advantageous tax regime for up to 4 years. The ‘4-year regime’ (4YR) is much shorter than the current ‘remittance basis’ which is available for up to 15 years. Those who have been UK resident for less than 4 years as of 6 April 2025 will be able to benefit in part from the new 4YR.

  • Sweet

Under the 4YR, qualifying individuals will be completely exempt from UK tax on their foreign income and gains (FIG). Importantly, non-doms will no longer be discouraged from bringing FIG (including trust distributions) into the UK because the remittance basis, which would previously have taxed FIG brought to the UK at up to 45%, is being abolished. The 4YR is being offered for free: there is no cost for those who qualify to use it. 

Too short?

Whether the 4YR will succeed as an internationally competitive tax system to attract talent and investment to the UK depends partly on how it compares with similar regimes offered in other jurisdictions which are hoping to attract the same people and capital. Below is a simplified comparison of alternative regimes in three other jurisdictions:

  • Italy offers a period of residence for up to 15 years in which the individual can take advantage of beneficial tax rules subject to an annual charge of EUR 100,000.
  • Spain’s so-called ‘Beckham deal’ limits taxation to Spanish sources only for up to 6 years, but is available only to those with qualifying employment or activity in Spain.
  • Switzerland offers an indefinite stay on a personally negotiated ‘forfait’ or lump sum arrangement (but users cannot work in Switzerland).

By this measure, 4 years is strikingly short. For example, the UK’s high quality education system is often a key driver for families to move to the UK, and 4 years is not enough time for a child to complete either primary or secondary education (let alone both).

Sweet enough?

The 4YR has considerable benefits in comparison to the current remittance basis.

Individuals qualifying for the new 4YR will be able to take advantage of:

a) receiving income and gains outside the UK free of UK tax;

b) bringing that FIG into the UK free of UK tax; and

c) receiving distributions from non-UK trusts in the UK free of tax.

By comparison, the remittance basis rules already look archaically complex; invariably specialist tax and legal advice was needed before arriving in the UK. Clients would typically require segregation of bank accounts to keep ‘clean capital’ separate from income and gains. Even well-advised clients struggle to overcome the pitfalls and problems inherent in the system that has developed over decades.

For those moving to the UK after 6 April 2025, it should no longer be necessary to establish segregated bank accounts, or to carry out the complex accounting required by the ‘mixed fund’ rules to determine tax on remittances. Some form of pre-arrival planning will still be required to maximise the benefits of the 4YR and to avoid falling foul of some of the other traps for those moving to the UK, but UK pre-arrival planning will be far less painful overall.

Based on the details published so far, the 4YR seems ‘pretty sweet’. However, the prospect of tax on worldwide income and gains after only 4 years could be too off-putting for those considering a move to the UK. Early indications suggest that the changes to UK inheritance tax (IHT) and the taxation of trusts may make the new regime unpalatable as currently proposed, but these aspects are the ones most likely to be revised during a consultation process before becoming law.

Pre-requisite: 10 years of non-UK residence

Eligibility for the 4YR will be based purely on residence, so that even individuals who are UK domiciled can qualify (or so it seems based on the information available so far). In order to benefit from the 4YR, you must not have been UK resident for any tax year in the prior 10 years. For these purposes, a ‘split year’ under the UK’s statutory residence test or a year in which you are ‘treaty resident’ outside the UK under a double tax treaty would still count as a UK resident year.  

Following the last major round of non-dom changes in 2017, a non-dom who left the UK for 6 full tax years could ‘re-set their clock’, meaning they could then be UK resident for a further 15 tax years before becoming deemed domiciled for IHT purposes. Non-doms who have clocked up 6 years of non-UK residence relying on the current rules may now find themselves ineligible for the new 4YR, unless they can increase their period of non-residence to the required 10 consecutive years.

Transitional reliefs: a foot in both camps? 

Many non-doms already living in the UK will find themselves unexpectedly moving to the arising basis of taxation with effect from 6 April 2025. However, these non-doms will also still be operating under the old regime, in relation to FIG arising while they were remittance basis users, meaning that they need to juggle two sets of rules at once.

A number of transitional reliefs have been announced to help ease the impact of these changes on current and former remittance basis users. These comprise (1) a flat rate of 12% tax on previously unremitted FIG which is brought to the UK during the tax years 2025/26 and 2026/27, (2) the opportunity to rebase the value of personally held non-UK assets to their 5 April 2019 values for disposals from 6 April 2025, and (3) a 50% reduction in the amount of foreign income arising in 2025/26 that will be subject to tax.

More detailed analysis of the transitional reliefs and their relevant conditions can be found here.

IHT: in scope after 10 years and 10-year tail

Currently, a person’s exposure to IHT (generally charged at 40%) is determined by his or her ‘domicile’ as a matter of UK law.  A person who is domiciled in the UK (or deemed to be so domiciled) is subject to IHT on their worldwide assets, whereas non-doms are broadly speaking subject to IHT on UK assets only.

Domicile under English law means where a person’s permanent home is but it is a subjective test and can be hard to determine. It is not simply where an individual is resident. It can be difficult for those moving to the UK to reconcile this with other jurisdictions’ concept of residence or centre of interests.

Under the proposed new rules, domicile will cease to be a relevant factor for IHT and a residency-based test will be introduced instead. Under this new test, a person would be subject to IHT once they had been resident in the UK for 10 years, and exposure to IHT would only be lost when the person had been resident outside the UK for a further 10 years. A residency-based test would to some extent benefit non-doms and their advisors, as certainty helps people plan for the future, but a ‘10-year tail’ is far longer than under the current rules (which is typically 3 years).

It is not certain yet if someone who has always been a UK domiciliary can escape the scope of IHT on worldwide assets 10 years after leaving the UK, but it appears this may be the case based on the information available so far. If so, this could be seen as a major ‘sweetener’ for expats.

However, disconnecting IHT from the concept of domicile brings with it complexity in a variety of areas of tax and succession law. It poses particular problems regarding the tax treatment of trusts (details can be found here).


Exactly what the new rules mean for the taxation of trusts is not yet entirely clear, particularly as regards IHT, in relation to which the Government has promised a consultation.

What has been stated clearly is that, outside of the 4YR, a UK resident settlor of a ‘settlor-interested’ trust (broadly, a trust which the settlor or connected persons can benefit from) will be taxed on all the income and gains within the trust (and potentially underlying companies). However, trusts created before 6 April 2025 will still protect non-UK assets from IHT. The complexities of the new rules for trusts are touched on after the practical examples below and more details on this are contained here.

What does this mean for me?

Let us consider some practical examples for non-doms:

1. Ally has been UK resident since 6 April 2021 (or earlier) and currently uses the remittance basis

Ally will still be able to claim the remittance basis in the next tax year (2024/25), but from 6 April 2025 she will be subject to UK tax on her worldwide income and gains. She will not be eligible for the 4YR.  

If Ally has unremitted FIG which arose whilst she was claiming the remittance basis, she will pay tax on this if she brings it to the UK after April 2025. This means Ally and her advisors will need to work under both the old and new rules.

Points to consider:

  • Ally could think about accelerating her receipt of FIG before April 2025, as she will still be able to claim the remittance basis and such FIG will therefore be free of UK tax when it arises (provided she does not bring the FIG to the UK).
  • Ally may want to take advantage of the 2-year transitional period (2025/26 and 2026/27) in which she will be able to remit FIG, which she has previously kept offshore, to the UK at a flat tax rate of only 12%.
  • If Ally is planning to sell or give away any foreign assets, she may want to consider waiting until after April 2025 as they should then be rebased to their value in April 2019, potentially reducing her capital gains tax (CGT) bill.
  • Ally can look at establishing a new trust before 6 April 2025, as under the current plans such trusts will continue to protect non-UK assets from IHT (although it will be important to consider the treatment of trusts in Ally’s home jurisdiction when deciding on next steps).

2. Billy became UK resident for the first time in the current tax year (2023/24) and intended to use the remittance basis

Billy will only be able to make use of the 4YR for 2 years (2025/26 and 2026/27). He will be able to claim the remittance basis in the current tax year and in the tax year 2024/25.

Points to consider:

  • Billy should consider deferring realising any non-UK gains or receiving foreign income if possible until after 6 April 2025, as after that date he will be able both to receive these and to use them in the UK free of charge under the new 4YR.
  • Subject to the small print of the new rules, Billy may also want to wait to receive any distributions from family trusts, as he may also be able to receive these free of tax after 6 April 2025.

3. Clara is planning to move to the UK in 2024/25 for the first time  

If Clara moves to the UK as planned, she will only be able to claim the 4YR for 3 of the 4 years (i.e., 2025/26, 2026/27 and 2027/28). It would probably be better for Clara to delay becoming resident in the UK until after 6 April 2025, as she will then be able to benefit from the 4YR for the maximum 4 years and bring her FIG to the UK tax free.

Points to consider:

  • If Clara needs to become resident in the UK before 6 April 2025 (i.e., in 2024/25), she will need to take advice on the remittance basis as it will be relevant to her for her first tax year of residence. This would result in much more complexity and costs than if she could delay her arrival.
  • However, if she cannot defer the commencement of UK residence until 6 April 2025, then if Clara claims the remittance basis for a year, she would be able to remit her 2024/25 FIG during the 2-year period following 6 April 2025 at the beneficial rate of 12% and should be able to rebase her personal assets to their April 2019 value.

4. Dora has been UK resident for +15 years 

Dora will not be able to use the 4YR. As she is already deemed to be UK domiciled for IHT and taxed on the arising regime, little will change for Dora unless she is the settlor of any trusts.

If Dora did settle a trust before she became deemed domiciled in the UK, the trust will lose its protection in relation to income and gains after 6 April 2025, and (depending on the terms of the trust) Dora is likely to be taxed on the income and gains as they arise.

Points to consider:

  • Dora should think about whether she needs to be a beneficiary of her trust, as if she and any spouse are excluded from benefitting, this may (depending on various technical points) protect her from tax on the income of the structure.
  • If Dora needs access to the funds held in trust for her living costs, she may want to consider becoming non-UK resident, and will need to take advice on the statutory residence test and how many days she will be able to spend in the UK each year.
  • Dora should consider delaying the remittance of FIG realised whilst she was claiming the remittance basis to after April 2025 to enjoy the 2-year period in which she will be able to bring previously unremitted FIG into the UK at the tax rate of only 12%.

What about their existing trusts: (un)protected settlements?

When the last big changes to the taxation of non-doms were introduced in 2017, the ‘sweetener’ at the time was the creation of ‘protected settlements’. These are trusts benefitting from a special tax status, which, broadly speaking, means that the income and gains of the trust is not taxed on the settlor as it arises (but is instead ‘matched’ to distributions and benefits made from the trust to UK resident beneficiaries).  

The protected settlement rules are complex and problematic, but they confer a valuable deferral of tax on the FIG of the structures (subject to limited exceptions). In addition, these trusts also provide effective shelter from IHT for non-UK assets (other than those connected with UK residential property).

Under the proposed new regime, protected settlements will no longer provide indefinite protection from income tax and CGT going forward if the settlor is UK resident. Instead, a UK resident settlor will typically be taxed on the income and gains as they arise, and the trust will effectively become transparent unless the settlor qualifies for the 4YR.

Time for new trusts?

Under the current proposals, trusts established before 6 April 2025 will continue to offer the IHT protection outlined above and may still be a valuable planning tool. However, the prospect of this sweetener is not straightforward and there are issues to consider before rushing ahead.

A number of uncertainties will not be clarified unless/until the proposed consultation takes place and the draft legislation is published. For example, it is not yet certain whether for trusts set up after 6 April 2025 the tax treatment at key events (such as establishing the trust, on 10-year anniversaries and on the death of the settlor) will depend on the residence of the settlor.

Points to consider:

  • If any of Ally, Billy, Clara and Dora have existing trust structures, they should take advice on how these may be treated with the introduction of the new rules.
  • It may be possible to mitigate the future income tax and CGT exposure for settlors of protected settlements by restructuring such trusts (possibly by excluding the settlor and their spouse), but there are wider issues to be considered in this context beyond just the UK tax ones.
  • It seems that a non-UK resident trust that was established by a settlor who has passed away or is not resident in the UK will be a valuable shelter from income tax, CGT and IHT. However, we do not yet have certainty on how a wide variety of trust benefits (including occupation of trust property, loans from trusts, etc.) will be taxed when enjoyed by UK resident beneficiaries during or beyond the 4YR.

Great unknown(s)

At the time of writing, there is no certainty that these rules will be enacted in the form currently proposed.  Whilst it seems there is political will to enact the 4YR within the term of the current Government, the mechanics of achieving the changes to IHT and taxation of trusts are yet to be thought through. For example, there has been no indication of how the UK’s network of relevant double tax treaties will operate when liability for IHT is determined on the basis of residency, rather than domicile.

However, if you are considering creating a trust to benefit from longer term IHT protection before April 2025, it would be sensible to take advice sooner rather than later, as this process can take months (especially if the assets to be transferred include operating businesses or assets in multiple jurisdictions).

We recommend that you take advice on your position and begin to prepare, whether you are planning on staying, coming or going.  

Our thinking

  • Women in Leadership: Planning for the future

    Sarah Wigington


  • Arbitration: Getting value for your money

    Daniel McDonagh


  • eprivateclient quotes Sally Ashford on considerations around power of attorney

    Sally Ashford

    In the Press

  • Computer says No - my prediction of UK border chaos on Wednesday 1 January 2025

    Paul McCarthy

    Quick Reads

  • Cosmopolitan quotes Sarah Jane Boon on how to deal with break-up admin

    Sarah Jane Boon

    In the Press

  • The Financial Times, The Guardian and City AM quote Sophie Dworetzsky and Dominic Lawrance on Labour’s proposed tax crackdown on non-doms

    Sophie Dworetzsky

    In the Press

  • Why Switzerland is poised to become a prime jurisdiction for families to establish their private trust companies

    Dharshi Wijetunga


  • Charles Russell Speechlys boosts international private wealth offering with the arrival of Amira Shaker-Bortman

    Amira Shaker-Bortman


  • Britain's most successful female Olympian has retired at 31, but how does the Family Court treat (early) retirement?

    Matt Foster

    Quick Reads

  • The UK’s March 2024 Budget: how the proposed new tax rules will work for US-connected clients

    Sangna Chauhan


  • International Tax team joins Charles Russell Speechlys’ in Singapore

    Kurt Rademacher


  • Charles Russell Speechlys grows its rankings in The Legal 500 EMEA directory

    Frédéric Jeannin


  • Family Offices for Middle Eastern Clients

    Elinor Boote


  • Planning opportunities for British expatriates returning to the UK

    Jeffrey Lee


  • The Financial Times quotes Nicola Thorpe on the importance of improving digital hygiene in the fight against cyber crime

    Nicola Thorpe

    In the Press

  • The role of national courts in arbitration

    Thomas R. Snider


  • The UK’s March 2024 Budget: good news for British ex-pats

    Lisa-Jane Dupernex


  • Drafting the “perfect” arbitration agreement

    Alim Khamis FCIArb


  • Sarah Jane Boon writes for the Financial Times’ Your Questions column on joint bank accounts

    Sarah Jane Boon

    In the Press

  • How the abolition of Multiple Dwellings Relief affects Build to Rent

    William Marriott

    Quick Reads

  • Regime change: The beginning of the end of the remittance basis

    Dominic Lawrance


  • Spring budget 2024: Agricultural Property Relief extended from 2025

    Hannah Connors


  • Charles Russell Speechlys hosts international arbitration event in Dubai

    Peter Smith

    Quick Reads

  • 'Saltburn': How the Catton family could have protected the Saltburn estate and could Oliver's inheritance still be contested? (Part 2)

    Grace O'Leary

    Quick Reads

  • 'Saltburn': How the Catton family could have protected the Saltburn estate and could Oliver's inheritance still be contested? (Part 1)

    Grace O'Leary

    Quick Reads

  • Beware of not obtaining a court order when settling your finances

    Julia Mauricio

    Quick Reads

  • Vulnerable elders : a harrowing story and the lessons which need to be learnt

    Sarah Wray

    Quick Reads

  • Home buyers and sellers hit by cyber-attack

    William Marriott

    Quick Reads

  • International Relocation: The Parent Trap 25 years on ...

    Joshua Green

    Quick Reads

  • Top Tips to Building your Brand - Women in Chancery

    Katelyn Silver

    Quick Reads

  • What next for residential property? Autumn Statement Update

    William Marriott

    Quick Reads

  • Potential parental disputes about school fees should a Labour government add VAT to fees

    Sarah Jane Boon

    Quick Reads

  • Labour government - potential change to cohabitation laws?

    Sarah Anticoni

    Quick Reads

  • Caring across borders: The UK’s Homes for Ukraine scheme and the global nature of parental responsibility

    James Elliott-Hughes

    Quick Reads

  • Game of Homes: Transatlantic Disputes

    Cara Fung

    Quick Reads

  • A Labour government: what might be in store for personal taxation?

    Sarah Wray

    Quick Reads

  • 5 top tips to make estate administration easier for your executor

    Jessica Dawkins

    Quick Reads

  • Back to School: How should recently separated parents face the new term?

    Quick Reads

  • The Family Fund: Bank of Mum & Dad 2.0

    Vanessa Duff

    Quick Reads

Back to top