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2nd May 2024

Changes in domicile rules: what you need to know


It is uncertain whether the proposed changes to the non-domicile rules will take effect due to the election, but, if they do, this will mark a significant change. 

In the Spring Budget on 6 March 2024, the government announced new rules for non-domiciled individuals, which means that they would look at residence going forward rather than domicile on the taxation of income.  

We are waiting for more information about the new rules later this year, but until then, we have some information from the technical note provided by HMRC (Technical note: Changes to the taxation of non-UK domiciled individuals - GOV.UK ( 


Under the current rules, UK residents who are not domiciled or deemed domiciled in the UK can choose to pay tax on the remittance basis, which means that foreign income and chargeable gain is only taxable when remitted (i.e. brought) to the UK. The term domicile is not defined by statute but is a concept that is used to determine the basis on which certain income, gains and capital are within the UK tax charge.

Proposed changes

Under the proposed changes, from 6 April 2025, this is to be replaced by a system based on the number of years of UK residency, without reference to a person's domicile.  

In this new foreign income and gains regime, individuals will not be subject to tax in the UK on foreign income and gains for the first four tax years of UK residency. They can bring foreign income and gains into the UK during this period without any UK tax liability. They will pay tax on UK income and gains in the usual way as currently. They will not be entitled to a UK personal allowance or annual exempt amount. From the fifth year, they will be fully taxable on their worldwide income and gains. However, their UK residence before 6 April 2025 will be taken into account when seeing if a person qualifies for the new regime. Individuals will need to be a non-UK resident for 10 tax years to reset the clock for these purposes. 

Under the new regime, there will be no need for individuals to track the movement of the funds as required currently, which means the new system should be much simpler. Tax residence will be determined under the statutory residence test. 

Key points

However, there may be opportunities for tax planning under the proposed transitional rules.  

  • Under these, if an individual has claimed the remittance basis and is non-UK domiciled or deemed domicile on 5 April 2025 and becomes taxable on their worldwide income and gains, they should be able to rebase their chargeable assets held on 5 April 2019 to the value as at that date. This means it is only gains arising after this date that would be subject to capital gains tax going forward. However, there are to be conditions and further details are needed as to how this will work in practice, e.g. if you can choose to rebase assets on an asset-by-asset basis. 
  • It appears that individuals who have been taxed on a remittance basis can elect to pay UK tax at a reduced rate of 12% to bring in pre-6 April 2025 foreign income and gains for the 2025/26 and 2026/27 tax years only. However, this will not apply to foreign income and gains within trusts. There should also be a relaxation of the mixed funds rules.   
  • Finally, individuals who are using the remittance basis who do not qualify for the new regime would only be taxed on 50% of their foreign income for 2025/26. This does not reduce the tax payable on foreign chargeable gains. 

There is also reference to the government consulting on moving inheritance tax (IHT) to a residence-based regime, rather than this being based on the individual's domicile and the location of their assets. 

The technical note specifies that IHT would be payable on worldwide assets once the individual has been UK resident for 10 years. Currently, IHT is payable on worldwide assets held by an individual who is UK domiciled or deemed domiciled in the UK and by non-UK domiciled individuals on their assets situated in the UK, including UK residential property held through foreign structures. 


We will have to wait for further details and the election to see whether these changes will go ahead. Future updates will be provided as developments unfold.