A beneficial regime for non-UK domiciled persons (the "non-dom regime") was first introduced in 1799 by William Pitt the Younger during the Napoleonic wars to shelter those with foreign property from the UK's wartime taxes. The present-day non-dom regime remains a key feature of UK tax law, albeit an increasingly contentious one.
In recent years the non-dom regime has been subject to significant debate and a series of reforms. In 2008, the Labour Government removed tax-free annual exemptions for remittance basis users. It introduced an annual remittance basis charge (RBC), whereby certain longer-term UK resident non-dom with over £2,000 unremitted foreign income/gains must pay an annual fee to claim the remittance basis. The Coalition Government made further changes in 2012 and 2015, increasing the RBC and adding tiers depending on the number of years of tax residency. Currently, the RBC is either £30,000 or £60,000 depending on the number of years the individual has been tax resident in the UK. Most recently, in 2017, the Conservative Government introduced the concept of 'deemed domicile', with the effect that an individual who has been tax resident in the UK for 15 of the previous 20 tax years will no longer be able to claim the remittance basis.
Since then, despite significant discussion on the matter, little has changed. The Conservative Government has, in effect, reaffirmed its support for the regime and the important role it plays in funding public services. The Labour opposition however has been vocal in discussing the possible limitation or abolition of the regime. What happens next is difficult to predict but will largely depend on the next election result.
In the 2020/21 tax year, the Government estimated there were 68,300 individuals claiming non-domiciled status, a decrease from 76,500 in 2020. These individuals can utilise the regime and claim the remittance basis which means they do not have to pay UK tax on income or capital gains on foreign assets unless remitted to the UK.
Major tax reform is unlikely before the next election. As in any pre-election period, announcements on future tax reform should be viewed with considerable caution. The technical and political complexities of reform to the non-dom regime mean that any reforms may well take a number of years to be implemented.