Reeves to water down non-dom changes as scale of exodus revealed
Rachel Reeves has confirmed she will alter some of the more controversial non-dom reforms announced in the Autumn Budget.
Speaking at the World Economic Forum in Davos, the Chancellor committed to tabling an amendment to the Finance Bill removing some of the most contentious elements of its changes to non-dom taxation.
Answering a question from The Wall Street Journal, Reeves said the government had been “listening to the concerns… raised by the non-dom community”, and confirmed two changes to the previous plans.
News of the amendments comes shortly after research from the global analytics firm New World Wealth found that the UK lost a net 10,800 millionaires in 2024, a figure which, according to the Adam Smith Institute, would have cost the Treasury the equivalent income tax take of over half a million average taxpayers.
In her maiden Budget, Rachel Reeves opted to plough ahead with the Labour party’s longstanding promise to abolish the non-dom status, a centuries-old regime allowing wealthy foreigners to live in the UK without paying tax on their overseas assets and income.
In its place, she confirmed the introduction of a residence-based scheme, which will provide incentives to investors and wealthy foreigners to come to the UK temporarily, slated to come into effect in April.
But the replacement regime – known as the Temporary Repatriation Facility – has a considerably shorter sunset period than the 200-year-old scheme it will replace, and prompted concerns it would trigger an exodus of wealthy foreign investors.
The government amendment is expected to increase the amount of money that wealthy foreigners who previously claimed non-dom status can bring into the UK without facing a substantial tax bill.
Reeves also sought to reassure non-doms that her reforms would not breach double-taxation agreements, a long-held fear of non-doms in some areas.
James Quarmby, a partner at Stephenson Harwood, told Morning Wire that the amendment was “reason for modest celebration”, and the first public signal that the government was listening to the concerns of non-doms and their advisors.
But he cautioned that the two concessions suggested by Reeves – if they are the sum total of the changes – are not significant enough, and in the case of the double taxation agreements, were not an issue in the first place.
Leslie Macleod-Miller, the chief executive of non-dom lobby group Foreign Investors for Britain, also welcomed Reeves’ “acknowledgment of the concerns raised by the international investment community”, but warned the amendments to the Finance Bill would need to go further than those revealed at Davos.
“While the reported amendments are a step in the right direction, we need more than tweaks to address the broader challenges undermining Britain’s competitiveness as an investment destination – so putting investment and frontline public services first,” he said.
The comments from Reeves will be widely interpreted as an attempt to stem the outflow of wealthy individuals from the UK, but David Lesperance, the founding partner at wealth advisory Lesperance & Associates, poured cold water on the moves, telling Morning Wire: “To the vast majority of fleeing UHNW non-doms, these ‘concessions’ will be meaningless.”
And, warning that changes to the Temporary Repatriation Facility would only serve to give non-doms more time to make exit plans, he added: “If Labour is really interested in making the UK tax regime more attractive to talented entrepreneurs and business leaders, they better come up with something better…and quickly!”
Maxwell Marlow, Director of Research at the Adam Smith Institute, said: “The rate at which millionaires are leaving the country is alarming. This will have serious implications for our wider economy and the public services which their taxes have been funding. And if the Treasury is losing money from these departing individuals, they may decide that they need to tax the average taxpayer even more than they already are.”
A Treasury spokesman said: “While we do not expect these changes to impact the £33.8bn of tax revenue that the OBR forecast to raise over five years, they reflect our continued engagement with stakeholders to make sure the reforms announced at Budget operate as intended.
“The Temporary Repatriation Facility is designed to encourage non-doms to bring their funds to the UK, encouraging them to spend and invest this money here.”