As the UK government unveils its latest policy paper on non-domiciled taxation, significant changes are set to reshape the landscape for high-net-worth individuals (HNWIs) starting April 2025. These updates, while providing clarity on previously announced measures, introduce new policies that may impact those considering the UK as a domicile.
For HNWIs seeking alternatives, jurisdictions like Dubai, Zurich, Hong Kong and Singapore offer attractive alternatives, each with distinct advantages and a welcoming environment for international investors. Alpadis Group, with offices in these cities, is well-positioned to assist in navigating these transitions.
The UK is replacing the traditional domicile concept with the “FIG regime,” which grants a four-year exemption on non-UK income and capital gains for newcomers. However, this exemption is limited to individuals who haven’t been UK residents in the last ten years. Despite discussions, the exemption period remains unchanged.
UK residents who are not eligible for the FIG regime will face new liabilities, with income tax and capital gains tax applicable to trusts they have established, eliminating previous protections.
Non-doms outside the FIG regime will no longer receive income tax relief in their first year under the new rules. This is a deviation from earlier suggestions that only 50% of foreign income would be taxed initially.
The government plans to allow rebasing of assets for capital gains tax purposes, though the specific date for this valuation is yet to be confirmed, likely in the upcoming Budget.
A new TRF will permit non-UK income and capital gains to be repatriated at a reduced tax rate for a limited period. The specific rates and timeframes are still under review, with potential extensions to include income and gains within certain structures.
Full IHT exposure will now apply to those who have been UK residents for ten years and will remain in scope for ten years after departure. This ensures that estates can be taxed at 40% if the individual ceases to be a UK resident just before the ten-year mark.
Trusts with UK resident settlors will no longer benefit from excluded property status, potentially leading to taxation under the relevant property regime and gift with reservation of benefit rules. The government will consider the impact on existing structures, with detailed plans to be released in the Budget.
In addition to the non-dom changes, the UK government has introduced a 20% VAT charge on private school fees starting January 2025, affecting payments made after July 2024 for terms beginning on or after this date. Furthermore, certain charitable reliefs for private schools will be removed starting April 2025, significantly increasing the cost of private education.
With these changes on the horizon, HNWIs may find Dubai, Zurich, Hong Kong and Singapore more appealing for their tax-friendly environments, robust financial sectors, and strategic global positioning. Each jurisdiction offers unique benefits:
Alpadis Group, with its offices in Dubai, Zurich, Hong Kong and Singapore, is equipped to guide HNWIs through these transitions. Our expertise in tax planning, trust management, and international relocation ensures that clients receive tailored advice and support. Whether you are considering a move or need to understand the implications of these changes, our team is here to assist you in making informed decisions and achieving your financial goals.
For more information, contact Alpadis Group.
