Non-domiciled status came into being back in 1799, in response to the growth of the British Empire around the world. It meant British subjects living in far-flung colonies did not have to pay taxes in the UK.
More recently, it’s been the preserve of globe-trotting super-rich who like to spend time – and own assets – in London.
Current rules – which will end in 2025 – mean those registered as non-domiciled with HMRC pay no UK tax on overseas income and capital gains, unless the money is brought into the Britain or deposited in a UK bank account. The status can last for up to 15 years, although a £30,000 annual fee applies after seven years.
Some 68,800 non-doms were registered with HMRC in 2021-22 – slightly lower than the three-year average to 2021 of 70,800.
The tax exempt status has been roundly criticised for decades, with deep reform or abolition becoming a staple of Labour and other opposition party manifestos. The system has been tinkered with over the years, including a significant overhaul on George Osborne’s watch in 2017, when permanent non-dom status was abolished.
Rishi Sunak’s Conservative government ran with Labour’s long-playing idea in this year’s Spring Budget, when it was announced that non-dom status will be entirely replaced with a “modern, fairer, simpler” system based on residency from April 2025. This will involve a four-year tax-free period for relevant new arrivals to the UK, after which standard full-rate income taxes will apply.
Keir Starmer’s team responded with a few more details on its proposals, including the closure of various loopholes left open by the Tory reform.
Now both the Conservative and Labour parties have pledged to end non-dom tax breaks in their current form. Politicians on both sides of the House of Commons agree that reform would generate billions of pounds of extra revenue for HM Treasury, which Labour says could be spent on health and education, and the Tories want to help fund a cut to National Insurance.
“While bringing in an extra £2.7bn a year for public services by 2028-29, our new simpler system will remain internationally competitive to attract the best talent to the UK,” explains a spokesperson for the Treasury. “New arrivals will benefit from 100% relief on foreign income and gains for their first four years as a UK tax resident, and there will be transitional arrangements in place for current non-doms.”
Despite these assurances, some pundits believe ending non-dom tax breaks will result in fewer High Net Worth Individuals living in and investing in Britain. A number of leading economists, meanwhile, expect the effect to be negligible. Research by the London School of Economics and University of Warwick, published in 2022, suggested that doing away with non-dom status would lead to just 0.3% of “remittance basis users” exiting the UK (that’s 77 people), while at least £2.4bn in extra tax revenue would be generated.
Talking Heads
In light of next year’s planned changes, we asked a panel of prime resi insiders:
- What effect, if any, will ending non-dom tax exemptions have on the UK’s prime property market?
- Have any of your clients already made moves or stated intentions to change their lifestyle or property ownership status as a result of the tax reform?
“There are no positive takeaways” to proposals to end the non-dom tax regime, argues buying agent Camilla Dell, while super-prime developer Matthew Robertson says changes “are bound to have a negative impact” on both the London proper market and wider UK economy.
But others – perhaps the majority – in the property industry are more sanguine. “I can’t see this stopping much activity,” says buying agent Jamie Freeman, while The Buying Solution’s Will Watson reports clients are generally willing to pay premiums for the quality of life that London provides. Shaun Drummond of Harrods Estates believes “wealthy international buyers have already factored in changes to the non-dom status,” so there should be little fallout to its removal.
As Rosi Walden of DDRE Global and Grant Bates of the Hamptons Private Office both point out, there’s more to living in the UK than tax rates.
There are no positive takeaways
Camilla Dell, Managing Partner at buying agency Black Brick
“There are no positive takeaways with either the Labour or Conservative Party proposed changes to the UK Res Non Dom regime and undoubtedly these changes will cause some UK Res Non Doms to leave the UK in search of more tax friendly jurisdictions and deter some wealthy people from relocating to the UK. Four years simply isn’t long enough for families to settle. However it remains to be seen what effect the changes will have on PCL property pricing. Quitting the UK doesn’t necessarily mean a property gets sold in the process. And some UK Res Non Doms who have been in the UK for many years and built a life here may decide to swallow the changes as their lives and their families lives would be too disrupted by leaving.”
Many have been spooked, not just by the proposed tax changes but the constant shifting of the UK tax landscape
Ollie Marshall, director of buying agency Prime Purchase
“Prior to the Chancellor’s announcement in the Spring Budget regarding non-doms, we expected some change, perhaps along the lines of the Italian system, whereby the government increased the annual levy. This would have been a sensible solution, increasing the tax take while also minimising the damage done.
“The Conservative solution seemed to wrongfoot many clients and tax planners. The initial reaction to the proposals was certainly negative but potentially had workable elements. However, no sooner had that been digested, then up pops Labour’s version.
“The tipping point or deal breaker with this for most non-doms is inheritance tax on trusts. However, it is difficult to plan for any of this until we see the legislation and outcome of the election as much of this may be pre-election rhetoric – what comes out in the wash may be more balanced with consultation. Without consultation, an undiluted Labour proposal would have huge implications, none of which would be positive.
“The advice is to wait and see. Make plans by all means but don’t make decisions as the reality might turn out not to be as bad as you think.
“Many have been spooked, not just by the proposed tax changes but the constant shifting of the UK tax landscape. Not only are there significant professional fees to pay in order to adapt and change, these people feel unwelcome and are saddened by that.
“While there is uncertainty and concern, we haven’t lost clients or deals over it yet. One of the biggest markets for us in central London is US buyers where there are a multitude of push factors: increased tax, gun crime, and a very polarising election. US buyers will be relatively unaffected by Labour’s proposed changes because of international tax treaties.”
Changes to the non-dom regulations are bound to have a negative impact
Matthew Robertson, co-founder and CFO of property developer Valouran
“The impact of these changes will be felt not only in the UK’s prime property market, but in the wider economy as a whole. In this recessionary environment we ought to be finding ways to stimulate economic growth, and one way to do that is to encourage international entrepreneurs to base their business and domestic lives here in the UK. Corporation tax rates have recently increased by nearly a third, a move which will serve to discourage business to base themselves here, and the changes to the non-dom regulations are bound to have a negative impact also.
“We are aware of a prospective European buyer who has very recently changed their plans to acquire an apartment in PCL directly as a result of these changes to the non-dom regulations.”
The prestigious British education system is a critical factor
Jo Eccles, Founder and Managing Director of prime central London buying agency Eccord
“We have had many conversations in the last few weeks with wealthy clients who have indicated their concern over the impending changes to the non-dom tax rules.
“Some are reviewing the tax regimes in locations such as Italy and Dubai with a view to relocating, but the prestigious British education system is a critical factor in their decision making.
“Because of our excellent schools, many wealthy families with children are reluctant to leave London altogether. Instead, we could see them choose to enrol their children into British boarding schools – rather than day schools – and base themselves elsewhere, in the process swapping their super-prime London mansion for a smaller London bolthole.
“This could result in non-dom demand for £30mn – £40mn properties being replaced with more modest £10mn – £15mn properties.”
I can’t see this stopping much activity
Jamie Freeman, Director at buying agency Haringtons UK
“Abolishing non-dom status, over time, might make some UHNW international buyers think twice about living and investing in the UK, but ultimately, I can’t see this stopping much activity because the country is still seen as extremely desirable by many across the globe.
“Despite recent economic and political change, London and the UK will always remain an attractive place for international buyers and investors given its geographical position between Europe and the US, cultural capital and relative stability.
“However, a word of caution; non-doms are by definition mobile so although the UK in an attractive place to live, they don’t have to stay because they have property elsewhere. Non-doms after all spend a huge amount of money on staff, living costs and yes, their gold cards, so having them in the UK is sensible because they will only go and live somewhere else.”
If you want the best of anything in life, it’s expensive and therefore living in the UK should reflect this and people will accept
Will Watson, Head of London at The Buying Solution
“We seeing a number of buyers currently taking advice on how they can get a “workaround” as very much want to make London their home. The key drivers for our market here are business and education for their children. Fastly followed by being English-speaking.
“Quite simply, my UHNW clients do not want to live, educate their children or have their business in mainland Europe or Dubai. One of my clients summarised it perfectly ‘London is the greatest/best city in the world’. If you want the best of anything in life, it’s expensive and therefore living in the UK should reflect this and people will accept. It will continue to attract the worlds wealth and talent.”
Even for those who decide to leave, most will hold onto their property
Mark Lawson, partner at The Buying Solution
“It is important to remember the proposed amendments will not kick in until 6th April 2025, i.e. after a General Election. So, the proposals as they stand could well change before they are implemented.
“From a country house market perspective, at the top end over £10million, I don’t think it will have a vast effect as only a small proportion of the market are bought by those not domiciled here in any case. Also from experience given their rarity, when a trophy, best-in-class house or estate becomes available, there will always be buyers and demand. The UK remains an attractive place for many reasons, and that will not change. Good schooling, great culture, pleasant climate, good time zones to do business east and west, etc. Alternative destinations such as Monaco, Switzerland, Dubai, and the Caribbean sound attractive, but they don’t offer what the UK does.
“Those buyers who are not domiciled here usually own or buy a country property to enjoy for specific reasons, for example they come to the UK for the summer months to avoid the heat in their own country (in the case of Middle Eastern buyers) or to enjoy the shooting season (in the case of many US buyers) and these buyers will still benefit from the 90 day/night exemption. There are currently no proposals to change the tax regime that will impact individuals domiciled abroad.
“Even for those who decide to leave, most will hold onto their property as they can still use them for 90 days a year, and they provide a safe haven to return to if required and a secure investment in a diversified portfolio. I think non-doms will simply change the way they use their UK homes. I suspect they will come here less, limiting their time to their 90 days when they can.
“Meanwhile for young families who have made their homes here, they have children happy at good schools and have made friends so are less likely to sell and move away.”
Wealthy international buyers have already factored in changes to the non-dom status
Shaun Drummond, residential sales Director at Harrods Estates
“The new laws are going to bring the UK into line with what is happening generally in advanced economies elsewhere around the world and we are aware of international buyers that have been preparing for potential changes in this kind of legislation for many years now. Wealthy international buyers have already factored in changes to the non-dom status so ultimately, we don’t think this will have much of an impact to the Prime Central London market in the foreseeable future.
“For many UHNW individuals, the Corbyn vs Johnson election of 2019 brought to light the stark reality of just how quickly things could change against their favour. While Labour did not win that election, ever since vendors, buyers and family offices have been working with their international tax advisors to ensure that their assets are protected should any changes arise in the future. Savvy international family offices are always looking at what could happen in the next five to ten years, not the next 12 months.
“Ultimately London will always remain an attractive place for UHNW international buyers, either as an investment or personal use. World class schools and universities, culture, relative political stability, and it’s time zone between Europe and the US ensure that London remains very high up on the list of desirable global cities for international buyers.”
The UK prime property market is influenced by a range of factors beyond tax policies
Rosi Walden, Advisor at DDRE Global
“Whilst there is much talk of whether the end of the non-dom status will drive wealthy property owners out of the UK, it is important to understand that the UK prime property market is influenced by a range of factors beyond tax policies. Our clients are very international, and whilst some choose to optimise for tax efficiency, many choose to prioritise other factors, such as security, quality of life and culture, all of which the UK provides in abundance. It will be interesting to see if the UK follows in the footsteps of the US or Switzerland, with different tax rates in different cities.
“It’s certainly something that my clients are thinking about, however everyone’s priorities are different. For example, I have one client, who is already based outside of the UK, who is looking to sell his apartment in London to reduce ties to the UK for tax reasons. On the other hand, I have several clients (British and international), who have not changed their plans.”
London’s prime property market has never been predicated solely on its tax advantages
Grant Bates, Head of the Hamptons Private Office in London
“The cessation of “non-dom” tax status in the UK has undoubtedly sent ripples through the prime property market. This change has prompted a recalibration of the decision-making process for prospective buyers, with some re-evaluating the timeliness of their investments.
“London’s prime property market has never been predicated solely on its tax advantages. The capital’s rich cultural heritage, distinctive architectural styles, world-renowned educational institutions, and huge range of pubs, restaurants and theatres continue to be potent drawcards. Consequently, while the tax exemptions’ cessation may deter a segment of the market, it is not anticipated to be a deterrent for the majority. These buyers are not primarily motivated by tax optimisation when acquiring a London residence. Furthermore, it is worth considering that political pledges, such as those proposed by the Labour Party, often undergo significant metamorphosis from manifesto to implementation. Thus, many clients remain steadfast, viewing the broader picture beyond tax concessions. In a manner akin to their approach to stamp duty, our affluent clientele are likely to adapt and proceed with their transactions, undeterred by the changing fiscal environment.”
It’s essential not to fall into the trap of complacency with the mindset that ‘London is London’
Vic Chhabria, Founder of London Real Estate Office
“Many aspects that once attracted foreign wealth to London and boosted the economy, have been altered in recent years. Most recent is the prospective end of the ‘non-dom’ tax status announced by both parties.
“This does carry some level of risk. Industries such as private education, investment, fashion, hospitality, travel, and property, which thrived on affluent non-dom residents, are likely to feel the impact. While the current and potential future governments believe that removing this status will bring in around £2.7 billion, they haven’t fully considered the losses these industries will face.
“It seems the government is attempting to appease the majority of voters with promises of taxing the wealthy to secure votes, without fully disclosing the inevitable costs and drawbacks which can occur with this.
“While I have confidence that London can maintain its global allure thanks to its strong economy, cultural diversity, educational prestige, connectivity, architectural heritage, and more, it’s essential not to fall into the trap of complacency with the mindset that ‘London is London’.”
Many of our clients, especially those from Asia, are now reevaluating their portfolios
Jon Johnson, Managing Director at estate agency Johns&Co
“Following a tour of our Asia offices in Hong Kong and Shanghai, where I met with numerous clients, it’s clear that the forthcoming abolition of non-dom tax exemptions could potentially make the UK less attractive for some international investors. Many of our clients, especially those from Asia, are now reevaluating their portfolios, with some considering selling their UK properties or accelerating their residency plans to capture the current tax benefits before they end. However, it’s evident for most that London will continue to hold global appeal due to its enduring attributes such as political and legal stability, long-term capital growth, and significant ongoing infrastructure projects enhancing value across the city. It does however underscore the need for strategic financial planning and professional guidance to navigate these changes effectively.”
Parts of the prime housing market will remain price sensitive for a little longer
Lucian Cook, Head of Residential Research at Savills
“[The removal of the non-doms tax regime] is of most relevance to the markets of central London and the private estates of the Home Counties where international, high and ultra-high net worth demand is most prevalent.
“In these markets, the initial reaction from some in the midst of a potential purchase is likely to be followed by a period of more sober reflection, as those affected weigh up their revised tax position against other more practical consequences of changing their life plans.
“In reality, such deliberations were inevitable at some point, given that non-dom taxation was firmly in the sights of the opposition. Essentially then, they have been brought forward and will take place with the benefit of a number of transitionary arrangements and concessions that might not otherwise have been made available.
“No doubt it will mean these parts of the prime housing market will remain price sensitive for a little longer.
“Politics will mean they are slower than the more domestic, prime housing markets to feel the benefit of an improving economic environment. Philosophically speaking that is.”
The abolition of these tax advantages could mark the end of a chapter
Jerome Lartaud, co-founder and director of property buying agency Domus Holmes Property Finder
“In my opinion, abolishing the non-dom tax benefits is likely to dampen demand from international buyers and investors, particularly within the Prime Central London market. This potential outflow of wealth could have ripple effects across the UK’s prime and super prime property sectors, impacting property values and market dynamics. However, it is very difficult (and too early) to predict what effect it will really have and to what extent.
“Historically, London has been renowned for being one of the top destinations in the world for the super wealthy to park their wealth by acquiring prestigious assets. Non-doms have avoided paying UK tax on their foreign income and capital gains, provided that money is not brought into the UK. This system has particularly benefited wealthy individuals with international ties, enabling them to significantly reduce their tax liabilities while living in the UK.
“The abolition of these tax advantages could mark the end of a chapter, and some experts predict that the abolition of the non-dom status will prompt a significant exodus of HNWIs from the UK to jurisdictions offering more favourable tax regimes, such as Dubai, Switzerland, and Singapore – all known for their low-tax environments and supportive policies for business growth and wealth preservation.”
