Chancellor Jeremy Hunt is considering scrapping or scaling back non-dom tax rules in the Budget next week (March 6), according to reports.
In an article published in FTAdviser’s sister publication, the Financial Times, today (February 29), Treasury sources had reportedly confirmed Hunt was considering the idea of scrapping the tax in an attempt to raise revenue for any Budget tax cuts he has planned.
However, the sources said the chancellor would only act on the idea if official forecasts worsened in the coming days further limiting the fiscal headroom he would have for any cuts.
Hunt is set to receive the final forecast from the OBR on Friday (March 1) ahead of the Budget which will determine where, and how far, the chancellor will be able to go with the tax cuts that he has hinted about over the past few months.
Speaking to ITV News this morning about Hunt’s plans, cabinet minister Damian Hinds did not deny the fact Hunt was considering scrapping non-dom tax status and instead said: “'In the run up to the Budget it's important the chancellor looks at many things”.
Current non-dom tax regime
According to HMRC, there were 68,000 non-doms in the UK in the tax year ending 2022.
While a study by academics at Warwick university and the London School of Economics in June 2023, found abolishing the non-dom tax regime would raise approximately £3.6bn a year.
Under the current regime, non-dom individuals do not pay UK tax on their foreign income or gains if they are less than £2,000 in the tax year or if the individual does not bring them into the UK.
If an individual’s income is £2,000 or more, or it is brought into the UK, they must report it to HMRC and either pay UK tax on it which may be claimed back or claim the ‘remittance basis’.
Labour had previously said in its mission documents it plans to get the NHS ‘back on its feet’ by abolishing non-dom tax for the very wealthy to fund the public service.
‘Huge’ implications for clients and wealth managers
Ollie Saiman, co-founder of wealth management firm Six Degrees said scrapping non-dom tax has been “the direction of travel for some time” and warned this would have “huge” implications for clients and wealth managers.
He said: “The last major overhaul to the non-dom rules in 2017 led to a vast increase in high-net-worth demand for wealth planning advice rather than offshore and trust planning.
“But for global banks, planning advice remains a side dish rather than the main course - if it’s on the menu at all. This creates what we call the high-net-worth advice gap, post-exit business owners becoming over-invested and under-advised. With purpose never mentioned or getting left behind.
“Scrapping the non-dom regime would mean even greater demand for independent wealth planning advice.”
While solicitors Payne Hicks Beach said scrapping the tax could drive non-doms currently based in the UK out to other jurisdictions.
