Rachel McEleney, associate tax director at Deloitte, comments on the changes:
“Under the current rules, non-UK domiciled individuals can have their foreign income and gains taxed on the remittance basis, meaning that only the portion of income brought into the UK is taxed here. This treatment can apply for the first 15 years that the individual lives in the UK, but a levy of £30,000 normally applies after seven years of residence, rising to £60,000 after 12 years. Individuals are normally deemed to be UK domiciled after 15 years of UK residence.
“Under the new regime, taxpayers will not be taxed in the UK on their foreign income and gains for their first four tax years of UK residence, provided they have not been UK resident in the previous ten tax years. After that point, they will be taxed in full on their worldwide income and gains. Unlike the current system, it will be possible to bring the untaxed foreign income and gains to the UK without triggering a tax charge. There will also be transitional rules for those who are already using the current regime, some of which are intended to encourage them to bring funds to the UK.
“The scope of inheritance tax currently also depends on domicile. Broadly, non-UK domiciled individuals are only subject to inheritance tax on assets that are situated in the UK, whereas UK domiciled individuals’ worldwide assets are taxed. As for income tax, individuals are normally deemed to be UK domiciled for inheritance tax after 15 years of UK residence. A consultation will be held on moving to a long-term residence-based inheritance tax system.
“The new regime will provide a clearer and more objective test than the current rules, but there will inevitably be a lot of complexity in the transition. There may also be winners and losers. Those who come for four tax years or less should be better off, whereas those who wish to come for longer may not.”
