Setting up multiple companies to separate business interests can seem very straight forward. There are however important considerations. We explore the implications of owning too many companies.
Non-Dom Changes from 5 April 2025 – Act Now!
21 November 2024
Estate Planning / IHT, Reducing Tax
The Autumn Statement 2024 brought significant changes to the taxation rules for non-domiciled (non-dom) individuals in the UK.
Who is considered non-dom?
Broadly you’re currently considered non-dom if you currently reside in the UK, but have origins and a permanent home outside the UK.
For example you may have been born in New Zealand, and your family all resides there, however you’re living in the UK at the moment.
Although you’re UK resident, you intend to return to New Zealand in due course, therefore you’re non-dom.
If this sounds like you, keep reading!
The way you’re taxed in the UK is about to change in a potentially massive way depending on your circumstances, and time is running out to plan for it.
What has changed?
Elimination of Domicile Status
The government has announced that from April 6, 2025, the tax system will move away from using domicile status and instead adopt a residence-based regime.
You’ll be taxed on your worldwide income and gains, regardless of whether you bring the funds to the UK or not.
Foreign Income and Gains (FIG) Regime
For those in their first 4 years of UK residence, you’ll not be taxed on your foreign income and gains, assuming you’ve not been UK resident in any of the consecutive 10 years prior to your arrival.
Temporary Repatriation Facility (TRF)
To ease the transition, a TRF will be available from April 2025, allowing those who have previously claimed the remittance basis to bring funds that they earned during this time to the UK during 2025/26 and 2026/27.
For those making use of this, foreign income and gains brought into the UK will be taxed a lower rate of 12%.
Overseas Workday Relief (OWR)
The OWR, which provides tax relief for UK residents non-doms working abroad, will continue in some form.
If you qualify for the FIG regime, OWR is also available where relevant and income received from performing duties abroad can be brought into the UK without a charge to UK tax.
Offshore Trusts
The new system will tighten rules around settlor-interested trusts.
From 2025, the current protections that allow UK-resident settlors to avoid UK tax on income and gains in these trusts will be curtailed if they do not qualify under the FIG regime.
What action should be taken now?
Rebasing foreign assets held at 5 April 2025
Non-doms may benefit from rebasing their foreign assets at their market value at 5 April 2017.
This can be done where an asset will be sold after 5 April 2025 and the remittance basis was claimed was claimed in at least 1 year from 6 April 2017 to 5 April 2025.
Using the Temporary Repatriation Facility (TRF)
Non-doms with foreign income and gains accrued under the current remittance basis can consider taking advantage of the TRF.
The facility allows funds to be brought into the UK at a reduced tax rate (potentially 12%, though the Labour government is reviewing this) during a limited two-year period from April 2025
Segregate Funds
Since the TRF rules might simplify remittances, ensuring that foreign income and gains are segregated from clean capital can help minimise UK tax exposure.
Structuring mixed funds now could offer flexibility when remitting later.
Review Offshore Trusts
Trust Restructuring
With the planned removal of tax protections for settlor-interested offshore trusts, reviewing existing trust structures is crucial.
Non-doms should assess whether the income or gains within these trusts could become taxable in the UK from April 2025.
Its also worth considering restructuring or making distributions before this date
Consider Alternative Trusts
Establishing or modifying non-settlor-interested trusts may be a viable alternative to manage tax liabilities.
Inheritance and Estate Planning
The uncertainty surrounding potential inheritance tax (IHT) and capital gains tax (CGT) reforms could impact wealth transfer strategies.
Non-doms should reassess their estate plans, considering gifts or creating trusts while current rules still apply
Maximise Use of Overseas Workday Relief (OWR)
For those who work abroad, continuing to take advantage of OWR during the initial three years of UK residence remains an option.
However, with potential revisions in the design of this relief, careful tax planning is advised.
Getting in touch
If you’re a non-dom individual any of the above relates to you, then please get in touch.
It’s vital that your tax affairs are reviewed, and the strategies above tailored to you specific circumstances as no action could be very costly come 5 April 2025.
Given the complexity of these changes, early planning is essential to optimise tax positions.
Please contact Christie on 01634 731390 if you’d like to discuss to situation further.
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Blogs related to Budget & Tax Planning
Take a look at our other blogs on the topic of the Autumn Budget.
What is tax planning? Why Should I do it?
The content in this blog is correct as at 19th November 2024. See terms and conditions.
