Impact of Non Dom Status Abolition Under Treasury Review

The Treasury is conducting a review into the effects of the abolition of non-domiciled tax status, a key provision which formerly allowed wealthy UK residents to avoid taxation on overseas income. Chancellor Rachel Reeves, who implemented the change in April, is assessing the impact through the analysis of self-assessment tax returns for the 2025 to 2026 financial year. The Treasury has indicated that findings from this review are expected to be published the following year.

This marks the first formal disclosure by the Treasury that an inquiry into the historic change is underway. Until its abolition, the non-dom system enabled individuals to claim that their main residence was outside the UK, subsequently shielding foreign earnings and wealth from British tax authorities. The new regime, based solely on residency, has sparked significant concern among former non-doms, many of whom now face unexpected inheritance tax liabilities.

The government forecasts an additional £34 billion in tax receipts by 2029 to 2030 as a result of the overhaul; however, there are warnings that these estimates may fall short due to the departure of high-net-worth individuals from the UK. Reports have noted that prominent figures, such as Conservative Party donor Mohamed Mansour and steel magnate Lakshmi Mittal, have changed residency to countries with more favourable tax regimes. Concerns about potential capital flight highlight the complex trade-off between increased tax revenue and the risk of driving away significant contributors to the economy.

The details of the ongoing Treasury review were disclosed in response to a freedom of information request that sought payroll data on non-domiciled individuals. HM Revenue and Customs declined to release this information, citing the ongoing review. Chris Walker, the economist who submitted the request, criticised the decision, stating the withheld data is crucial for assessing the true impact of the reforms.

Jeremy Hunt, the previous chancellor, initiated the process to end non-dom status but did not extend the reforms to inheritance tax as Reeves has now done. The outcome of the current review will provide clearer insight into the fiscal and economic repercussions of the move, influencing future policy decisions on UK tax and residency rules.