Labour’s Proposal to eliminate non-dom tax status could have wide implications for Americans living in the UK
Ahead of the upcoming election, Labour has announced proposals to eliminate the non-dom tax status. Currently, non-UK domiciled individuals can generally live in the UK for the first 7 years and be taxed solely on their UK earnings and any remittances of funds brought into the UK. After 7 years, individuals who hold significant amounts of money overseas can choose to pay a remittance basis charge of either £30,000, £60,000 or £90,000 (depending on how long they have lived here) each year to avoid being taxed in the UK on a worldwide basis. Eliminating the non-dom tax status would likely mean that many non-dom individuals will need to pay UK tax on a worldwide basis soon after settling in the UK even if their stay is not intended to be permanent.
Our understanding is that under Labour proposals, no newly arriving persons will be able to claim non-dom status after April 2016 and existing non-doms would be provided a limited period of time to re-structure their wealth from a tax perspective. The proposal also outlines temporary exemptions for students and foreign workers seconded to the UK for a short period of time, probably two to three years.
A change in the rules will likely mean that any American living in the UK as a non-dom taxpayer will need to review their wealth held outside of the UK and ensure that any necessary restructuring takes place within the transition period to maintain tax-efficiency on an on-going basis in both the US and UK.
We are closely monitoring any developments in this space and will be planning for how, if Labour wins the election, any changes could affect MASECO clients who fall under the non-dom tax status.