11 July 2024

Earlier in the year both Labour and the Conservatives had committed to reforming the taxation of non-doms and their structures. Both sets of proposals had a lot in common but there were some important differences, including, in particular, the inheritance tax treatment of existing trusts.

Labour’s election victory on 4 July means that we now know it will be their version of the reforms which will be implemented. The remaining questions are:

  • Exactly what will the reforms involve; and
  • When will they become effective?

This article summarises where things stand at present and flags some of the rumours we have been hearing as to how the previously announced proposals could be amended. Please note that none of these proposals have been finalised at the date of publication and it is absolutely possible that there could be material changes before the relevant laws are enacted.


Whilst the precise scope of the new rules is still to be determined, we do have a good idea of what we think the “core” regime will look like.

We expect the remittance basis regime to be replaced with effect from 6 April 2025. Those moving to the UK will instead be able to claim a new special status in their first four years of UK residence, during which time they will be exempt from UK tax on all foreign income and gains and can bring those funds into the UK without any further income tax or capital gains tax.

We also expect the UK’s inheritance tax rules to change such that individuals will be exposed to UK inheritance tax on their worldwide assets if either:

  • They have been UK tax resident in the UK for 10 or more tax years (the “residency criteria”); or
  • They have previously satisfied the residency criteria but ceased to be UK resident within the last 10 tax years (i.e. there will be a 10 year “tail”).

Trusts established by non-domiciled individuals will also lose many of the UK tax protections which they have enjoyed to date. In particular:

  • Income and gains arising in trusts which have a living, UK resident settlor, could be attributed to and taxable on such settlor; and
  • For so long as the settlor is within the scope of UK inheritance tax on their worldwide estate (see above) it is likely that the trust fund will also be exposed to UK inheritance tax.

Those affected should be taking advice and considering their options now so that they are ready to act quickly, as and when, we have more detail as to how the new rules will work in practice.


The key changes are all (theoretically) scheduled to take effect from 6 April 2025.

At this stage, all three of the following remain possible:

  1. All (or most) of the changes will come into force on 6 April 2025;
  2. Some of the changes will come into force on 6 April 2025 but significant aspects will be delayed;
  3. All of the changes will be delayed (possibly back to 6 April 2026).

In terms of their relative likelihood there are plausible arguments to support any of them, but our view is that people are generally underestimating the probability of scenarios 1 and 2.

The rest of this article summarises the proposals announced to date and assumes that the changes will all be made with effect from 6 April 2025 (which, in our view, is the most likely scenario).

The proposed changes for individuals

The new “4-year FIG regime”

The existing income tax and capital gains tax regime for non-doms (the remittance basis) will be abolished for future income and gains arising on or after 6 April 2025.

It will be replaced by a new special status which can be claimed during the first four years of tax residency in the UK. This has been referred to as the “4-year FIG regime” (FIG = Foreign Income and Gains).


Individuals claiming the status will not pay any UK tax on foreign income and gains arising in the tax years for which they make the claim.

They can also freely bring such funds into the UK without further tax (albeit that bringing the funds into the UK could expose them to inheritance tax as they would then become UK situated assets).

Labour have hinted at providing some tax relief for UK investment income arising in those years as well. They have said: “We will consider whether there should be an investment incentive during the four-year window, so that UK investment income is free of UK tax and not disincentivised versus investment elsewhere in the world.”[1]

There are expected to be some drawbacks to making a claim, such as losing entitlement to the income tax personal allowances and the capital gains tax annual exempt amount. We would also assume that if capital gains are exempt then capital losses will not be allowable.


The 4-year FIG regime will be optional. It is anticipated that individuals will be able to claim the new status in any or all of their first four years of UK tax residence.

To be eligible, an individual must not have been UK tax resident in any of the 10 tax years preceding the four-year period.

For those who first became tax resident in the UK in the 2022/23 tax year or later, such that they will have been UK resident for fewer than 4 tax years as of 6 April 2025, they will be able to claim the 4-year FIG regime for whatever is left of their first 4 years of UK tax residence.


Linking access to the new regime to residence rather than domicile will make it simpler to apply and give greater certainty to taxpayers.

As announced, it will be available for a much shorter period than the current remittance regime (4 tax years as opposed to a maximum of 15). However, where the new regime does apply, it will be more generous than the existing remittance basis in a number of ways. In particular:

  • It will be available to those who want to move to the UK permanently (the remittance basis is only available to those who intend to leave the UK again); and
  • It will completely exempt foreign income and gains from UK income tax and capital gains tax and will allow them to be brought into and used in the UK without any further taxation.

There have been rumours that Labour are considering extending the four year period in some way, perhaps by introducing a taper period in years 4 – 7 during which the taxpayer benefits from a reduced version of the tax relief. Whilst many affected individuals would be delighted to see this come to pass (and such a proposal has support in academic as well as professional circles) we have yet to have any official comment on the point. Until that changes, any such rumours should be thought of as hopes rather than likelihoods[2].

Transitional rules

Labour have indicated that they will adopt two of the three transitional rules proposed by the Conservatives:

Rebasing relief

There will be a form of rebasing relief for individuals who have claimed the remittance basis in the past and are neither domiciled nor deemed domiciled as of 5 April 2025.

If they dispose of a foreign asset on or after 6 April 2025 which was held by them on 5 April 2019 they can calculate the taxable gain by reference to its 6 April 2019 value.

The original description of this relief published by the Conservative government – from which Labour have not demurred - stated that “This rebasing will be subject to conditions that will be set out later.”[3] Assuming that Labour also intend to impose some additional conditions, we are yet to see what those might be.

The Temporary Repatriation Facility

There is expected to be a “Temporary Repatriation Facility” (TRF) available to those who have claimed the remittance basis in the past (whatever their current status).

Those people would be able to remit pre-6 April 2025 foreign income and gains in the 2025/26 or 2026/27 tax years and pay tax on such remittances at a flat rate of 12%.

Labour’s comments on the proposals noted a concern that “after the two-year window for stockpiled foreign income and gains (FIG) there will remain sizable stockpiled FIG overseas and a huge disincentive to bring it to the UK. So we will also explore ways to encourage people to remit stockpiled FIG to the UK, so that we can end the legacy of the current non-dom rules.”

We think it is possible that a combination of carrots (perhaps an extended window in which to make use of the TRF) and sticks (such as a long-stop date by which any unremitted FIG is automatically deemed to be remitted) might be used here to encourage more people to remit their FIG.

We still awaiting a number of clarifications as to how the TRF might work in practice, including whether it will be available in relation to trust distributions from non-UK resident trusts.

Inheritance tax

The technical document published after the March budget (i.e. under the Conservative government) stated that “From 6 April 2025 the government intends to move inheritance tax from a domicile based regime to a residence based regime. This will be subject to consultation.”

It went on to indicate that the intention (on which views would be sought) was to move to a system where:

  • People who have been tax resident in the UK for 10 years will be subject to inheritance tax on their worldwide assets; whereas
  • People who do not satisfy those criteria will only be subject to inheritance tax on their UK situated assets.

There will also be a 10 year “tail” such that individuals remain exposed to inheritance tax on their worldwide assets for a further 10 years after leaving the UK.

Labour’s response indicated that they supported “the principle of a ten-year window for inheritance tax”[4] and we are expecting them to proceed along similar lines to those proposed by the previous government.

A consultation on this is due shortly and will no doubt provide further information.

The proposed changes for trusts

The tax treatment of trusts established by non-domiciled settlors is due to change considerably.

Income tax and capital gains tax in relation to trusts

The current position

Currently, certain trusts established by individuals who are neither domiciled nor deemed domiciled at the relevant time benefit from “protected trust” status. This generally means that gains and foreign income arising within the trust are not taxable on the settlor(s) and are only subject to UK tax when distributions are made to UK resident beneficiaries.

The proposed changes

From 6 April 2025 the protected trust regime will effectively cease to apply, meaning that income and gains in affected trust structures could become taxable on any UK resident settlor(s) from that date.

In practice, this appears unlikely to impact trusts which either (a) have no living settlors or (b) have only non-UK resident settlors (assuming the settlor(s) are not planning on moving to the UK). It will also have no immediate impact on trusts which have settlors who are still within their first 4 years of residence in the UK and are claiming the benefit of the 4-year FIG regime.

For those with UK resident settlors (who are cannot or choose not to claim the benefit of the 4-year FIG regime), the implications will depend upon a number of factors, including the terms of the trust (exclusions could be particularly significant in determining which forms of income or gain can be attributed to the settlor), the circumstances in which the trust was established and has been operated and the nature of the trust’s investments.


Existing structures should be reviewed now to determine:

  • how they might be affected;
  • whether steps can be taken to reduce any negative UK tax implications (e.g. changing the beneficial class and/or the investment approach); and
  • whether any other restructuring options should be considered.

Inheritance tax in relation to trusts

The current position

At a high level, trusts established by non-domiciled individuals can benefit from a broad exemption from inheritance tax for so long as they only hold assets situated outside of the UK.

The proposed changes

Labour have indicated that they will remove this inheritance tax protection. Their 9 April proposals said: “Labour will include all foreign assets held in a trust within UK inheritance tax, whenever they were settled, so that nobody living here permanently can avoid paying UK inheritance tax on their worldwide estates.”[5]

Their election manifesto used slightly different wording but with a similar overall effect: “We will end the use of offshore trusts to avoid inheritance tax so that everyone who makes their home here in the UK pays their taxes here.”[6]

How this will be implemented in practice remains to be seen but our working assumption is that the inheritance tax status of trusts will depend on the inheritance tax status of their settlors. For example, it appears very possible that for so long as a trust’s settlor is exposed to UK inheritance tax on their own worldwide estate (see above):

  • the trust fund will be within the scope of what is known as the “relevant property regime” (which means inheritance tax charges at a rate of up to 6% every ten years and when funds or assets leave the trust); and
  • the trust fund will also be deemed to be part of the settlor’s estate (under what is known as the gift with reservation of benefit, or “GWROB”, rules) unless the settlor is excluded from benefit. This could expose the trust fund to inheritance tax at a rate of up to 40% on the settlor’s death (in addition to the 6% charges mentioned above).


This is probably the area of the new rules which requires the most clarification and there are currently a large number of unanswered questions. For instance, it is not clear how the rules will apply to trusts with excluded settlors or dead settlors.

There have been plenty of rumours that grandfathering of existing trusts remains a possibility (i.e. that trusts established before a certain date will be allowed to retain their current inheritance tax treatment). We think this is unlikely but it may be that Labour take other steps to help those who are impacted (who might otherwise find themselves worse off under the new regime than if they held the trust fund directly). For example, Labour might consider allowing trusts to be wound up at a flat rate of tax or give some sort of credit for GWROB charges against the 6% rate or vice-versa. However, for now this is purely speculation.

How we can help:

We have a vast amount of experience advising non-domiciled individuals and their structures, as well as those moving to and from the UK.

We can advise you as to how the new regime might impact you, help you plan your affairs accordingly and assist you in taking advantage of the transitional rules.

[1] Labour’s plan to close the non-dom loopholes

[2] The unduly short nature of the 4 year period has been one of the most commented on features of the proposals in both professional and academic circles. We understand that the Treasury did (prior to the March Budget) model longer periods, but that 4 years was chosen because it was the longest period which the Office of Budget Responsibility (OBR) would - in a short-time frame – allow to be costed in the overall yield figures. Hopefully with a longer time frame to look at this properly, the new Labour administration might be able to persuade the OBR to look at this in more detail.

[3] Technical note: Changes to the taxation of non-UK domiciled individuals - GOV.UK (www.gov.uk)

[4] Labour’s plan to close the non-dom loopholes

[5] Labour’s plan to close the non-dom loopholes

[6] Change Labour Party Manifesto 2024

Key contact

Headshot of Edward Hayes

Edward Hayes Director

  • Private Client Services
  • Private Wealth
  • Tax

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