Britain’s General Election saw the centre-left Labour Party led by Keir Starmer get elected by an overwhelming majority. Starmer’s government has, so far, stressed stability and adherence to fiscal rules. Markets have largely reacted positively as a result and certain sectors (notably home construction) have gained as more investment is expected.
One group that stands to lose is residents with non-domiciled status – UK residents whose income from abroad is not subject to British taxation. While other criteria exist, the main eligibility threshold required the resident to have lived abroad for two years in the last nine fiscal years. An annual charge of 30,000 pounds allows the non-domiciled individual to not pay taxes on their foreign income in return for foregoing their tax-free income tax and capital gains tax allowance (worth approximately 12,000 pounds each).
The arguments in favour of keeping this special tax status is that, while having Britain as their main residence, the non-dom’s economic activity is primarily outside of the country, with the income subject to taxation in the jurisdiction it was earned.
Overall, this only affects a small number of individuals – just 74,000 UK residents were registered as ‘non-doms’ in the fiscal year 2022-23.
Plans to reform this special status were brought in already during the Conservative government, but did not make it into law before the General Election was called. Under previous proposals, people moving to the UK after April 2025 would only obtain four years of non-dom status. With a 50% discount applied during the first year. By 2029, the non-dom status would disappear completely.
Under Labour’s plans, this 50% discount would be removed and foreign assets held in trust would also be subject to UK inheritance tax. It is expected that these measures will raise 5 billion pounds per year.
Nothing further has been said since the General Election. The question is not if but when the rules will change.
While many high net worth individuals are likely to choose to take the financial hit and stay, others are actively looking to relocate. According to anecdotal evidence, potential new locations include Italy, Cyprus and Monaco. Since 2017, Italy offers a Non Dom tax regime, under which participating foreigners whose income is generated abroad pay a flat annual 100,000 euro tax. This is, however, set to double to 200,000 euros in the near future.
Finally, Monaco is the prime low-tax destination par excellence where living standards are high and a wide range of professional services in English is available. Not charging any personal income tax since the 19th century, Monaco is unlikely to change its status as a low-tax state any time soon.