Autumn Budget 2024. The Death Knell for the Domicile Concept

The concept of Domicile will be removed from the legislation and replaced with a residence-based regime, the immediate impact of this is the withdrawal of the remittance basis

The Chancellor had already announced that the concept of domicile will be removed from the legislation and replaced with a residence-based regime. This has been confirmed and more details have now been published.

The immediate impact of this is the withdrawal of the remittance basis.

Very briefly, the soon-to-be defunct remittance basis allowed those who were not long-term UK residents to not pay UK tax on overseas income and gains arising during their early UK residence provided they did not bring that money into the UK (or spend it in such a way to benefit them while in the UK, i.e. “remit” it). So they were only taxed on UK-arising income and gains and any remittances.

Initially, using the remittance basis only costs them their personal allowance (first 7 years), then it additionally costs £30,000 per year (next 6 years), then £60,000 per year before it is withdrawn when they have been resident for 15 of the previous 20 years. At which point they are “deemed domiciled” in the UK.

The new measure instead gives new arrivals to the UK full tax relief on their overseas income and gains – no UK tax to pay at all – for the first 4 years of UK residence. This will kick in from 6 April 2025. They can bring these funds to and spend these funds in the UK with no additional tax charge.

After these four years they will be taxed in the UK on their worldwide income and gains. These individuals must have been non-UK resident for 10 consecutive years prior to arrival to the UK to qualify.

This is comparable to the famous ‘Beckham law’ in Spain, where newly arrived individuals could be taxed as though non-resident for their first few years of residence there.

The Government has also announced their transition measures for this change:

• for those who have used the remittance basis in the past, gains on sales of capital assets made after April 2025 may be taxed based on their 2017 value instead of their original cost (re-based),
• those who have used the remittance basis pre-April 2025 can remit their formerly protected income and gains at a rate of 12% during 2025/26-2026/27, under a new Temporary Repatriation Facility (rising to 15% in 2027/28).

The government are also following up with an overhaul of the IHT system to a residence-based regime. Non-UK assets will be in scope of UK IHT if the individual was resident for at least 10 of the previous 20 years prior to the IHT event.

There are also various measures relating to offshore trusts that will be the subject of a further blog.

Related content

• RESIDENCE & DOMICILE RULES
• UK EXPATS
• PERSONAL TAX
• PRIVATE CLIENT ADVISORY
• HIGH NET WORTH INDIVIDUALS
• ARTICLES