The non-domiciled (non-dom) tax status has long allowed UK residents claiming a permanent home abroad to avoid UK tax on foreign income—provided it stays offshore. This complex and often controversial system, not tied to citizenship, has enabled many non-doms to live in the UK, own expensive properties, and use public services while shielding overseas earnings.
Domicile hinges on where someone intends their permanent home to be, enabling long-term UK residents to claim they’ll eventually return “home” despite decades spent in Britain. Often associated with wealthy elites, the regime has sparked intense debate about fairness and national contribution.
Public Scrutiny and the Political Spotlight
The issue gained public attention when Rishi Sunak’s wife, Akshata Murty—daughter of Indian billionaire Narayana Murthy—was revealed to hold non-dom status while residing in Downing Street. Despite being the First Lady, she paid no UK tax on her global income. The revelation drew significant criticism during a period of rising living costs and mounting tax burdens for ordinary citizens.
A Policy Born in the Empire—and Now Ending
For over 200 years, the non-dom regime allowed UK residents domiciled abroad to pay tax only on UK-sourced income and gains. Offshore assets were typically exempt from UK inheritance tax.
Originally intended to attract high-net-worth individuals (HNWIs) and global capital, it helped transform London into a financial powerhouse. In 2022/23, some 68,800 non-doms contributed an estimated £8.9 billion in taxes—including £30,000 to £60,000 annual charges for claiming the remittance basis (HMRC).
Critics, however, viewed the policy as unfair—permitting wealthy residents to legally sidestep UK taxes while benefiting from public services.
The 2025 Abolition and HNWI Exodus
The abolition of non-dom status takes effect on 6 April 2025 and has already triggered notable responses. In 2024, 10,800 liquid millionaires—those with over $1 million in investable assets—left the UK. This marks a 157% increase from 2023 (Henley & Partners, Adam Smith Institute), and equates to 1.79% of the UK’s 602,500 liquid millionaire cohort.
Forecasts suggest up to 135,000 may depart in 2025, with one millionaire having left the UK every 48 minutes in 2024. The UK had 3,061,553 millionaires in total in 2023, and the number of liquid millionaires is projected to decline to 2.54 million by 2028—a 17% drop (UBS Global Wealth Report). Nonetheless, with over 600,000 liquid millionaires remaining—many of whom are unlikely to relocate to non-English-speaking countries—the economic impact is partly cushioned.
Revenue Gains vs Economic Risk
The government anticipates £33.8 billion in extra revenue over five years (OBR), yet independent forecasts highlight potential downsides:
- Centre for Economics and Business Research (CEBR): Up to £12.2 billion in losses by July 2029 if half the non-doms leave.
- Adam Smith Institute: Up to £111 billion in losses by 2035, alongside 44,415 job losses by 2030.
- Market signals:
- Prime London property sales down 15% in Q1 2024.
- Startup investment fell 38% after the reforms were announced.
- 80% of wealth advisors expect significant HNWI departures (Oxford Economics).
Non-doms also contribute heavily via indirect taxes: an average of £800,000 in VAT spending and £890,000 in stamp duty over five years.
Policy Options to Mitigate Risks
To minimise negative effects, the government could consider:
- Enhancing the Temporary Repatriation Facility
- Offering investment-based tax credits
- Promoting the UK’s cultural and financial strengths
- Negotiating bilateral tax agreements
- Reviewing migration data to adjust strategy accordingly
The 90-Day Rule and Residency Triggers
Under the Statutory Residence Test (SRT), spending more than 90 days in the UK in either of the past two tax years is a “tie” that counts towards UK tax residency. When combined with other ties (family, accommodation, or work), it may result in residency—even if fewer than 183 days are spent in the UK.
This rule significantly affects HNWIs who carefully manage time spent in the UK to avoid residency and corresponding tax obligations.
Where the Wealth is Heading
The top relocation destinations for HNWIs in 2024 include:
- United Arab Emirates (UAE) – +6,700 net inflow Zero income, capital gains, and inheritance taxes; luxury infrastructure and favourable visa rules
- United States – +3,800 Dynamic investment environment despite progressive tax system
- Singapore – +3,500 No capital gains tax; stable legal and economic landscape
- Canada – +3,200 Strong public services and lifestyle appeal
- Australia – +2,500 Quality of life and stable economy
Other popular destinations include Switzerland, Monaco, Portugal, and the Cayman Islands. Yet some HNWIs choose to remain in the UK due to language, family ties, or embedded business operations.
Why Not All Millionaires Can Pay Easily
While the perception may be that millionaires can always absorb higher taxes, the following factors complicate this assumption:
- Illiquid Assets: Real estate, private equity, or artwork may not generate regular cash flow.
- Irregular Income: Capital gains and dividends can be volatile or unrealised.
- Complex Trust Structures: Many assets are held in tax-efficient international trusts now subject to UK IHT after 10 years.
- Rising Compliance Costs: Multi-jurisdictional reporting, legal fees, and restructuring costs increase financial strain.
For many, the issue is not wealth but liquidity and timing—which can lead to asset sales or relocation as the only viable options.
Conclusion: A Calculated Risk with Real Stakes
The non-dom reforms aim to correct perceived imbalances in the UK’s tax system. Yet, early signals suggest the economic and reputational costs may be higher than expected.
With global competition for talent and capital intensifying, the UK must weigh fiscal fairness against economic agility. Monitoring migration patterns, investor sentiment, and employment trends will be essential to ensure the reforms do not become a case of well-intentioned policy undermining long-term national interest.
Sources:
Henley & Partners Wealth Migration Report 2024, UBS Global Wealth Report 2024, Adam Smith Institute Millionaire Tracker 2024, Centre for Economics and Business Research, Oxford Economics, HMRC, MoneyWeek, CNBC, KPMG UK, Saffery.
Disclaimer:
This article is for informational purposes only and does not constitute financial, legal, or tax advice. Readers should consult qualified professionals for tailored advice. The author and publisher accept no responsibility for any loss arising from reliance on this information.
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