The major UK tax change coming in next week affecting thousands of people (2025)

From April 6, the current rules for the taxation of non-UK domiciled people in the UK will end

A major tax change coming into force next week will affect thousands of people across the country. The government is set to abolish the non dom tax status - meaning people who have their primary residence outside of the UK will still have to pay tax here.

From April 6, the current rules for the taxation of non-UK domiciled individuals will end. The concept of where someone lives as a relevant factor to in the UK tax system will be replaced by a system based on tax residence.

A non-UK domiciled individual refers to someone whose permanent home for tax purposes is outside the UK, and so only pays UK tax on the money they earn in the UK or move into a UK bank account.

For people with a lot of money, this means they can make big savings if they nominate a lower-tax country as their domicile.

But the changes, announced by Chancellor Rachel Reeves, will increase the 'temporary repatriation facility', the initiative that allows people living non-domestically to bring money into the UK without paying significant taxes on it.

Other key features of the change include:

• introducing a new 4-year foreign income and gains regime for new arrivals who have not been a UK tax resident in the previous 10 years
• allowing individuals previously taxed on the remittance basis to remit pre-6 April 2025 foreign income and gains using a new Temporary Repatriation Facility
• reforming Overseas Workday Relief
• replacing the domicile-based system for inheritance tax with a residence-based system

According to the government, they want to make it so that everyone who is long-term resident in the UK pays their taxes here.

So, the government are moving the 'outdated' concept of domicile status from the tax system and implementing a new 'residence-based regime' which focuses on attracting 'the best talent and investment to the UK'.

Under the previous, Conservative government's plans, people who moved to the UK from April 2025 would not have to pay tax on money they earned overseas for the first four years. And then they would pay the same tax as everyone else.

Announcing the new, Labour government's plans in her Autumn budget in October 2024, the Chancellor said that non-dom status will be abolished from April 2025 and will be replaced with a residence-based regime, which will also bring foreign earnings into the UK inheritance tax system.

At the time, Labour said it would extend the transition period for people to bring money onshore from two years to three.

In January, after facing criticism from analysts who claim the additional taxes have prompted an exodus of millionaires, the Chancellor was forced to defend her decision.

She said taxes on non-doms were increased to raise funds for public services, in an interview at the World Economic Forum in Davos with the Wall Street Journal.

“But we have been listening to the concerns that have been raised by the non-dom community,” Ms Reeves said.

“And in the finance bill, we will be tabling an amendment which makes more generous the temporary repatriation facility, which enables non-doms to bring money into the UK without paying significant taxes.”

The Treasury said the non-dom reforms are still expected to raise the £33.8 billion of tax revenue forecast by the OBR with the change taken into account.

Ms Reeves said she had also heard concerns from countries that have double taxation conventions with the UK, such as India, that they could be required to pay inheritance tax.

“That’s not the case. We’re not going to be changing those double taxation conventions.

“So, countries like India, non-doms from India will not be affected by the inheritance tax changes,” she said.

No 10 said the Finance Bill would bring forward the final policy but that the amendment “doesn’t change the overall approach, which is that we are replacing this outdated regime”.

“It doesn’t change our approach to replacing the outdated non-dom tax regime with a new internationally competitive resident-based system that addresses unfairness in our tax system, attracts the best talent and investment to the UK and ensures that everyone who is a long-term resident of the UK pays their tax here,” the Prime Minister’s official spokesman said.

The proposed change to the Finance Bill would increase the Temporary Repatriation Facility - a three-year window where non-doms can pay a discounted rate on foreign income and gains.

A Treasury spokesperson said: “While we do not expect these changes to impact the £33.8 billion of tax revenue that the OBR forecast to raise over five years, they reflect our continued engagement with stakeholders to make sure the reforms announced at Budget operate as intended.

“The Temporary Repatriation Facility is designed to encourage non-doms to bring their funds to the UK, encouraging them to spend and invest this money here.”

Tax rises were among the reasons Britain lost a net 10,800 millionaires in 2024, more than double the 4,200 that in 2023, according to the New World Wealth (NWW) global analytics firm.

Shadow chancellor Mel Stride said Labour had been forced to admit its plans made the UK less attractive.

“Labour’s Budget is falling apart in front of our eyes.

“At the election Labour said their plans would raise money, now they have been forced to admit their plans make the UK less attractive.

“But the damage is already done, tax revenue equivalent to hundreds of thousands of taxpayers has already been lost.

“Labour simply does not understand business and the economy, and working people are paying the price.

“It is obvious that this Chancellor is deeply out of her depth.

“She is losing control of the public finances and pressure is now building for yet more tax rises or spending cuts.”