A significant exodus of wealthy individuals is underway as non-domiciled residents prepare to leave the UK before April, responding to the recent Budget changes regarding inheritance tax rules.
Tax specialists and legal experts report that numerous affluent individuals are hastening their departure from Britain in the coming months. The catalyst for this movement stems from modifications to inheritance tax exemption requirements, as outlined in Chancellor Rachel Reeves’ March Budget.
The Budget confirmed the dissolution of the non-dom system, which previously allowed UK tax residents with permanent homes overseas to avoid British taxation on foreign income and capital gains for 15 years. The new framework requires individuals to reside outside the country for between three and ten years before gaining exemption from the UK’s 40 per cent inheritance tax on foreign assets.
Those who emigrate during the current tax year will benefit from a reduced exposure period, facing only three years of UK inheritance tax liability on their worldwide assets. This concession has created a marked incentive for wealthy individuals, particularly those of advanced age, to expedite their departure plans.
The Labour government projects raising £33 billion from these inheritance tax modifications, though industry experts view this figure as notably optimistic. The new regime will impose inheritance tax on UK assets for residents’ first decade in the country, after which it extends to all holdings.
The Treasury maintains these arrangements achieve an appropriate balance, ensuring long-term UK residents contribute fairly while providing a reasonable adjustment period for those affected by the changes. However, wealth managers suggest this transitional window may prompt a more rapid departure of non-doms than initially anticipated, potentially impacting projected revenue figures.
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