Categories
NEWS: What Can Non-Doms Expect from the UK Property Market?
The future of the UK's non-domiciled (non-dom) tax status big changes as Labour plans to end the regime by April 2025.
Written by: Luka Ball
This proposed reform, part of the party’s approach to reshaping public spending and tax policy, could phase out a system that allows individuals who reside in the UK but maintain a foreign tax domicile to avoid local taxes on overseas earnings.
While non-dom status is legally sanctioned and widely used by high-net-worth individuals, its impact on fairness and economic benefit has long been a subject of debate.
Non-doms currently benefit from exclusions on UK income tax and capital gains tax for assets held abroad. As the government weighs the logistics of abolishing this provision, discussions continue about how the change could affect the UK economy.
Non-doms must pay an annual “remittance charge” of £30,000 once they have resided in the country for seven out of the past nine tax years. This increases to £60,000 for those who have resided 12 out of the past 14 years.
In 2022, HMRC reported that only 55,200 taxpayers claimed non-domiciled status. Among them, 37,000 non-doms on the "remittance basis" contributed over £6 billion in tax between 2020-21.
Many argue that losing non-dom status might prompt some high-net-worth individuals to relocate, potentially leading to decreased investment and overall economic contributions. The Adam Smith Institute has estimated that such a shift could cost the UK around £6.5 billion in economic activity by 2035, affecting jobs and sectors that benefit from non-dom spending.
In response to these concerns, proponents of the reform suggest it could bring in additional tax revenue to support public services. The government has positioned the reform as part of a broader fiscal plan, which Chancellor Rachel Reeves has called a “once in a generation” budget.
Reeves emphasised the goal of addressing systemic inequalities without increasing national debt. Labour’s estimates suggest the changes could add £2.7 billion annually to the Treasury by 2028.
The scheme initially attracted criticism when it was revealed that Rishi Sunak's wife, Akshata Murty, held a non-domiciled status. This information came out in April 2022, just months before the peak of the cost-of-living crisis in the UK. In March 2024, it was announced that the Conservative government would remove the regime.
While there were doubts that the Conservative government would continue this change if they remained in power, Labour was elected in July and has committed to removing the non-dom status.
Will Non-Doms Be Leaving the UK Property Market?
In short, yes. A number of non-doms are leaving the UK and most likely going to be spending their money elsewhere. Co-owner of West Ham United, David Sullivan, said "a lot of rich people are leaving the country as a result of what they anticipate in the budget. Three or four of my friends already have gone to Monaco or Dubai."
Some of the countries that could be on the map for non-doms:
Spain
The scheme known as 'Beckham Law' allows foreign workers to pay a flat tax rate of 24% on Spanish-sourced income for the first €600,000. The nickname unsurprisingly stems from David Beckham, who was one of the first people to use this scheme when he played for Real Madrid.
As well as this, income earned outside of Spain is exempt from Spanish taxes, offering an attractive setup for expats working in Spain who maintain substantial foreign income.
UAE
The UAE has no personal income tax, no capital gains tax, and no inheritance tax. Because of this, the UAE (especially Dubai) is seen as an attractive option for those seeking complete tax exemptions, particularly for passive income like dividends and capital gains.
Italy
Italy offers an annual flat tax of €100,000 on foreign income for new residents under its non-dom regime.
Switzerland
Non-residents pay taxes only on Swiss-sourced income and wealth. The lower maximum income tax rates (36%) and the absence of tax on foreign income for non-residents make Switzerland appealing for those with significant overseas earnings.
Greece
Foreign nationals who invest at least €500,000 in Greek property or businesses can pay a fixed tax of €100,000 on foreign income, with an option to extend benefits to family members for an additional €20,000 per person.
Portugal
Under the Non-Habitual Residence (NHR) programme, foreign income is exempt from Portuguese taxes. This law aims to attract more expats to Portugal. It may be coming to an end soon, but applications have been extended into Spring 2025.
As the proposed changes progress, many in the UK’s business and financial sectors continue to assess the potential implications. Labour remains committed to addressing perceived inequities in the tax system while also seeking to maintain the UK’s appeal to high-net-worth residents and international talent.
Is the UK Still Worth Investing in?
The UK will still be a fruitful investment hub for high-net-worth individuals (HNWIs) and foreign nationals, but it certainly won't be a tax haven.
Some of the key advantages of holding property in the UK include:
-
Capital Appreciation: Prime UK property, especially in cities like London, has a history of long-term capital growth. This potential for appreciation can enhance overall portfolio value over time, making UK property a strong choice for building wealth.
-
A Stable Market: The UK property market is popular among global investors due to its stability, regulatory framework, and economic resilience. This stability makes it attractive during times of global economic or political uncertainty.
-
Rental Income: High-quality properties in sought-after areas can generate attractive rental yields, providing a steady income stream. Demand for rental properties in cities like London, Manchester, and Edinburgh remains strong, driven by professionals and international students.
-
Currency: For overseas HNWIs, fluctuations in the pound can present buying opportunities, especially when currency exchange rates are favourable.
-
Generous Financing Options: HNWIs often have access to preferential mortgage rates and flexible financing options in the UK.
-
Favourable Tax Structuring Opportunities: While tax changes are on the horizon, UK property still offers ways for HNWIs to structure their investments. Trusts, companies, and partnerships can help optimise tax exposure based on an investor's domicile and residency status, though expert advice is essential to navigate these structures.
-
Cultural and Lifestyle Appeal: For those who travel frequently or have business interests in the UK, property ownership offers lifestyle benefits, with access to some of the world's top educational institutions, healthcare, cultural attractions, and infrastructure.
For those who currently hold non-domicile status, staying in the UK will depend on their asset portfolios and short-term goals. Some will likely wait and see how this change affects them before making any major changes, whereas others will want to get ahead of the curve.
Considering Making a Change?
If you're contemplating moving overseas due to any recent changes, we can help you manage your assets in the UK. We have a dedicated team of expat and high-net-worth finance specialists who are familiar with the complexities of this arena.
At Clifton Private Finance, we have long-term relationships with high street, private and specialist lenders and will always work on your behalf to find the best deal for your circumstances. We can source bespoke financial products and offer tailored guidance throughout the process to make sure that getting funding for your investments is as smooth as possible.
To see what we can do for you, call us on 0117 205 4828 or book a free consultation below.
