Non-Dom Tax Changes: How the UK Plans to Attract Global Wealth

The UK government is revising its approach to non-dom tax reforms, aiming to strike a balance between fairness and economic competitiveness. Amid concerns over a growing exodus of millionaires, Rachel Reeves has announced key changes to incentivize investment.

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Non-Dom Tax Changes: How the UK Plans to Attract Global Wealth | en.Econostrum.info - United Kingdom

The UK government has announced revisions to its planned reforms of the non-domiciled (non-dom) tax status, following analysis that linked stricter policies to a significant outflow of millionaires from the country. The decision signals a shift in balancing tax fairness with economic competitiveness as the UK seeks to retain wealthy residents and encourage foreign investment.

At the World Economic Forum in Davos, Chancellor Rachel Reeves revealed plans to expand a key measure, the temporary repatriation facility, which allows non-doms to bring overseas income into the UK at a reduced tax rate. The move follows criticisms that the original proposals risked further damaging the UK’s appeal to high-net-worth individuals.

Recalibrating Tax Reforms to Stem a Growing Exodus

The government’s approach to reforming non-dom taxation comes after alarming data revealed the UK lost over 10,000 millionaires in 2024, a 157% rise compared to the previous year. Research conducted by New World Wealth and investment consultancy Henley & Partners positioned the UK as the second-largest net loser of millionaires globally, after China. Analysts attributed this exodus to Brexit, concerns over economic instability, and dissatisfaction with tax policies.

Originally, Labour’s election manifesto called for the abolition of non-dom status to address what it described as unfair advantages for the wealthy and to channel the resulting revenue—estimated at £1 billion annually—into public services. However, the amendments aim to avoid further outflows while still generating economic benefits.

The revised policy extends the transition window under the temporary repatriation facility to three years. Reeves explained that this adjustment ensures non-doms have greater flexibility in repatriating overseas wealth without incurring high tax penalties, encouraging investment within the UK.

Tax experts welcomed the move but urged the government to align tax reforms with migration policies to attract new high-net-worth individuals. Peter Ferrigno, group tax director at Henley & Partners, highlighted the need for “joined-up thinking” to restore the UK’s competitiveness, particularly given the opportunity to draw wealthy residents from countries like the United States.

Balancing Fairness With Competitiveness

The revisions come as Labour’s stance on non-dom taxation faces scrutiny from multiple sides. Critics within the Green Party argue that prioritising tax breaks for the wealthy reflects misplaced priorities, particularly as the government maintains cuts to vital programmes such as winter fuel payments. Meanwhile, the Conservative Party has accused Labour of policy inconsistency, claiming these amendments undermine its election promises.

However, Reeves defended the revisions, asserting that they reflect a pragmatic approach. A Treasury spokesperson added that the updated facility is expected to encourage significant economic contributions from non-doms without reducing overall projected tax revenue of £33.8 billion over five years.

By addressing concerns raised by stakeholders and analysts, the government hopes to strike a balance between ensuring a fair tax system and maintaining the UK’s status as an attractive destination for global wealth.

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