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ATT responds to Changes to the Taxation of non-UK Domiciled Individuals

6 September, 2024

The Association of Taxation Technicians (ATT) has submitted a response to the policy paper on changes to the taxation of non-UK domiciled individuals. The proposals would mean an individual's liability to Income Tax, Capital Gains Tax and Inheritance Tax from 6 April 2025 being based on the Statutory Residence Test rather than the less clear-cut concept of domicile.  

The ATT broadly supports the proposed changes, which should simplify a complex area of personal taxation and provide greater certainty.  

Whilst no draft legislation has yet been published and several details remain to be confirmed at the Budget, our principle concerns based on the policy paper are:

  • The proposed 4-year Foreign Income and Gains (FIG) exemption appears to only be available to new arrivals with no history of UK residence in the previous 10 years. This would adversely affect internationally mobile individuals with a history of occasional UK residence, and risks discouraging short-term residence in the UK (for instance for fixed term work contracts).
  • As proposed, an individual would become liable to UK IHT on their overseas assets after 10 years of UK residence. It is not clear whether this is 10 consecutive years. If so, the IHT regime may be susceptible to manipulation. We suggest the test should instead be based on 10 years of UK residence in the previous 15 years.
  • The proposed 10-year 'tail period' during which an individual would remain liable to UK IHT on their overseas assets is significantly longer than under the current rules. This could discourage people moving to the UK for fear of long term IHT exposure. We suggest a tapered tail period based on the number of years an individual has been UK resident would be more appropriate.

Further details of the above can be found in our full response, along with our other observations.