What Is Non-Dom Tax?

In the UK, individuals with non-domiciled status – often referred to as non-doms – are taxed differently from UK-domiciled residents. The rules surrounding non-dom tax have long been a topic of political and financial debate, especially for high-net-worth individuals living in the UK but with foreign ties.

This guide explains what non-dom tax status is, how it works, who qualifies, how the rules are changing, and how it affects taxation on foreign income and gains.

What Does Non-Dom Mean?

Non-dom is short for non-domiciled individual. In UK tax law, domicile refers to your long-term home or permanent place of belonging. It’s not the same as residence.

Someone may live in the UK (be resident for tax purposes), but still be domiciled elsewhere – for example, if they were born abroad, have foreign parents, or intend to retire in another country.

Non-doms can be UK residents but claim that their permanent home is abroad. This distinction affects how they are taxed on income and capital gains.

What Are the Current Rules for Non-Dom Status?

A UK resident who claims non-dom status can choose to be taxed on either:

• The arising basis – where all worldwide income and gains are taxed in the UK

• The remittance basis – where only UK income and gains are taxed, and foreign income is taxed only if it’s brought into (remitted to) the UK

The remittance basis is automatic in some years and optional in others. Choosing it can mean losing certain allowances.

Non-doms who have been UK residents for 7 out of the previous 9 tax years must pay an annual remittance basis charge to keep using the remittance basis:

• £30,000 if resident for 7 of the last 9 years

• £60,000 if resident for 12 of the last 14 years

After 15 years of UK residence, individuals become deemed domiciled and lose the ability to claim the remittance basis. They are then taxed on worldwide income and gains like other UK-domiciled individuals.

How Do You Become a Non-Dom?

Domicile is a legal concept that can depend on:

• Where you were born

• Where your parents are from

• Where you intend to settle permanently

You usually acquire a domicile of origin at birth (usually your father’s country of domicile), and this can only be replaced by a domicile of choice if you settle permanently elsewhere.

If you move to the UK but maintain strong ties abroad and plan to return, you may retain your foreign domicile and claim non-dom status. It’s not something you apply for formally – it's a matter of legal fact, but you must declare it on your tax return if you wish to use the remittance basis.

How Are the Non-Dom Rules Changing?

In the Spring Budget 2024, the UK government announced major changes to non-dom rules, due to take effect from April 2025.

Key proposed changes include:

• Scrapping the current remittance basis

• Replacing it with a simplified residency-based system

• A new four-year foreign income exemption for new arrivals in the UK

• After four years of UK residence, all residents will pay tax on worldwide income and gains, regardless of domicile

• Transitional reliefs for existing non-doms moving onto the new system

These reforms are designed to modernise the rules and bring the UK more in line with other countries, while maintaining competitiveness.

How Many Non-Doms Are There and Who Are They?

According to HMRC data, there were around 68,000 non-doms in the UK in 2021, down from a peak of over 120,000 in earlier years. The decline reflects changes in the tax rules, especially the introduction of deemed domicile status.

Many non-doms are:

• High-net-worth individuals

• Foreign investors or business owners

• Senior executives or professionals working in the UK on assignment

• People with inherited overseas wealth or dual-nationality status

They often use non-dom status to protect foreign income or assets from UK taxation.

Why Is Non-Dom Status Controversial?

Critics argue that non-dom status creates an unfair system where wealthy residents can avoid paying tax on their full income. Supporters say it encourages international talent and investment in the UK.

In recent years, governments have tightened rules, closed loopholes, and added charges to limit long-term use of the remittance basis.

Final Thoughts

Non-dom status allows certain UK residents to limit their tax liability by not paying tax on foreign income and gains, unless brought into the UK. However, this status is subject to strict rules, charges, and time limits.

With major changes due from April 2025, existing non-doms and those considering relocating to the UK should review their tax situation now. Advice from a tax specialist with experience in international and non-dom taxation is strongly recommended. Planning ahead could prevent significant tax exposure under the new regime.