Budget 2024: What is non-dom tax status and how many have it in the UK?

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Jeremy Hunt is reportedly contemplating axing the controversial “non-domiciled” tax status in his spring Budget this week to assist fund pre-election tax cuts.

The non-dom tax status is for rich abroad people and scrapping the loophole has been certainly one of Labour’s flagship insurance policies.

If scrapped by the chancellor to lift emergency funds for the Budget, it would depart the opposition scrambling for brand spanking new sources of money to fund different key pledges.

Mr Hunt has not at all times been in favour of axing the status, nonetheless, saying again in 2022: “I would rather wealthy foreigners spent their money in Britain.”

The points round folks with non-dom tax status got here beneath the highlight once more final 12 months when The Independent revealed that Rishi Sunak’s spouse Akshata Murty dodged thousands and thousands in UK tax by benefiting from the loophole.

Research from the London School of Economics discovered that scrapping the particular exception would increase the authorities over £3.2bn a 12 months, one thing that would assist fund different tax cuts. Their forecast predicts that simply 0.3 per cent of individuals with non-dom status would depart the nation in this situation.

However, the Institute for Fiscal Studies this week warned the chancellor to “tread carefully” on eradicating it.

The analysis group identified that there are round 37,000 folks claiming the non-dom tax exception in the UK, nonetheless paying a collective £6bn in UK taxes. Any main change, they argue, may see many of them go away the nation – taking this income with them.

Here, we check out all the pieces you’ll want to learn about the non-dom status:

What is ‘non-dom’ tax status?

First launched in 1799, and refined over the years, the UK’s “non-domiciled” tax regime has come beneath scrutiny in latest years.

A “non-domiciled individual” is an individual who lives in the UK however is not settled right here completely. They will solely pay UK tax on cash made in the nation, and can keep away from paying it on their international revenue in the event that they decide to say the “remittance basis”.

This permits rich people dwelling in the UK to elect the lower-tax nation as their domicile, making for main financial savings.

There are two methods you may declare this status. Firstly, in the event you weren’t born in the UK, or your father got here from a special nation. The solely different method is in case you are over 16 and select to go away the UK to dwell elsewhere completely.

If you’re a non-dom and select to not pay UK tax in your abroad earnings, you will need to pay:

You can now not declare non-dom status after you have lived in the UK for 15 of the earlier 20 years.

Non-doms that don’t declare the remittance foundation will merely pay UK tax on their international revenue (over £2,000).

Several different international locations equally function a tax system with particular rights for non-dom people.

How many people with non-dom status live in the UK?

In April 2023, there were 68,800 non-doms living in the UK, with an estimated 37,000 claiming the special ‘remittance basis’ tax status.

Ms Murty remains a non-domicilied individual as a citizen of India. However, following the revelations of her tax arrangements, Ms Murty opted to begin paying UK tax on all her worldwide income in future and for the 2021/22 financial year.

The prime minister’s wife issued a statement at the time, accepting that her tax status was not “compatible” with Mr Sunak’s political role, and that she appreciates the “British sense of fairness”.

It was estimated she dodged up to £20m in UK tax over several years on her dividends from Indian IT firm Infosys, founded by her father.

Conservative peer Zac Goldsmith held non-dom tax status till changing into an MP in 2009, when he relinquished it beneath media and political stress. He inherited the status from his father.

Other well-known non-doms have included: oligarch and former proprietor of Chelsea soccer membership Roman Abramovich, media mogul Viscount Rothermere, and AstraZeneca CEO Pascal Soriot.