Consequences of the abolition of the non-dom regime and 30 October 2024 Budget: what are the family law issues for wealthy clients leaving the UK?

The UK is facing a loss of the highest proportion of millionaires in the World over the next few years according to the Adam Smith Institute. The think tank has warned that the share of the British population who are millionaires is expected to decline by 20% by 2028 with serious implications for the economy. This is attributed to factors including increased taxation, threats of further tax hikes and the abolition of the non-dom regime.
 
As planned, the Labour Government will abolish the current non-dom tax status from 6 April 2025.  In its place, it will introduce a new residence-based regime. Individuals opting into the regime will get a short-term break, avoiding UK tax on foreign income and gains for only the first four years of tax residence.  A strict residence-based system for Inheritance Tax will effectively end the use of offshore trusts to shield assets from Inheritance Tax. 

Monaco, Italy, Switzerland and Dubai are reportedly among the destinations of choice for wealthy clients considering a move from the UK, following the abolition of non-dom status, and the tax changes introduced by the Labour government in the 30 October 2024 budget. 

The family law consequences for such individuals moving from the UK can be complex and will depend on various factors, including their reasons for moving, their immigration status, and their personal and financial circumstances. Here are some key family law considerations: 

Divorce Jurisdiction

If one spouse is considering divorce, the timing of their move could affect where the divorce proceedings can be initiated. The English courts have jurisdiction over a divorce if either spouse is domiciled in England, or they are habitually resident in England at the time the divorce petition is filed. Moving abroad could potentially limit the ability to file for divorce in England, which might be strategically important if England is seen as a more favourable jurisdiction. 

Financial Settlements

The English courts are known for their discretionary powers in dividing marital assets and for a starting point of equality of division of all assets accumulated during a marriage (absent a nuptial agreement). Once jurisdiction for divorce in England is lost, the financial settlement on divorce could be subject to the laws of another jurisdiction, which might be significantly less generous to the weaker financial party. 

Maintenance Orders

Spousal and child maintenance orders made in England might need to be enforced abroad if one party moves away. This can be complex, costly to enforce and subject to international treaties and agreements. 

Child Arrangements and Abduction

Moving from England can raise important issues of living arrangements for children, including choice of school and potential international child abduction. The UK is a signatory to the Hague Convention on the Civil Aspects of International Child Abduction, which aims to ensure the prompt return of children who have been abducted from their country of habitual residence. If one parent wants to relocate the children abroad and the other parent refuses to agree, an application can be made to the Family Court for permission to remove the children permanently from England to another country, subject to the children’s best interests, and to resolve any issues regarding choice of school.

Immigration Status

The immigration status of a spouse may be affected by the other spouse leaving and moving abroad. For example, if they are in the UK on a spousal visa and the marriage ends, this could affect their right to remain in the UK. 

Prenuptial and Postnuptial Agreements

If a couple entered into a prenuptial or postnuptial agreement under English law, moving abroad could affect the enforceability of that agreement, depending on the laws of the country to which they are relocating.  Wealthy individuals would be well advised to review the terms of the Agreement, and enter into a “mirror agreement” in the new jurisdiction, if so advised.

It is important for wealthy families considering a move from the UK to seek specialist legal advice, both in the UK and in the potential new country of residence, to fully understand the implications for family law matters. The complexities of cross-border family law require careful navigation to protect one's rights and interests.