Unless Parliament ends very soon, there will be a new Government in the next tax year.  This means that to be safe, any tax planning should be done before 6th April 2024, which given the date of Easter, realistically means on or before 29th March 2024.

Pundits are predicting only one thing with any degree of certainty, that the Conservatives will lose their majority.  I agree. I suspect half of their voters will not vote for them.  Indeed, I suspect many of them will not vote at all.   I don’t expect Labour to be able to form a government on its own, many Tory voters will still not vote for Labour, but with the SNP and Liberal Democrats, then the Labour Party could form a Labour led Government

The Labour Party has vowed to dispense with the non-dom regime and replace it with a five year temporary visitor regime.  They have invested significant political capital on this issue so the “pink in opposition, blue in power” epithet is probably unlikely to apply on this topic.

Options for individuals who are currently non-UK domiciled 

Leave the country for a country which has a good double tax treaty with the UK could be one option, and one which I suspect many will choose.   The challenge there is to find a country which offers an attractive tax regime but in a way which does not prejudice the application of the double tax treaty.  For example, many treaties do not afford protection if the person seeking to rely on it is only taxed on local income (e.g. non-doms).

This would rule out countries with similar regimes to our non-dom regime, such as Italy, Spain, Portugal etc.   The Crown Dependencies and Overseas Territories of the UK would also not be ideal.

Possible front runners could be Switzerland or the UAE.

Option two could be to transfer all foreign assets now to a non-UK resident trust before 6th April.   And then hope that the changes do not obliterate our existing regime for taxation of benefits etc for offshore trusts.

Non-doms and offshore trusts

Your typical non-dom’s current position is that foreign income and gains arising from assets held by the Trust are not taxed on him / her because he meets the following five tests:-

  • when he added value to the Trust, he was non-UK domiciled; 
  • the Trustees were non-UK resident and remain so; 
  • the Trustees hold only non-UK situs assets; 
  • he has not tainted the Trust by adding value after he became UK deemed domiciled and, most importantly of all, 
  • he and his spouse are excluded from benefit.

This last point is very important as the UK tax code has focussed on wealthy individuals trying to transfer their income and assets by divers means and has termed that person the “settlor” in many circumstances.  The UK tax code always reverts to trying to tax the settlor.  This failed when a settlor excluded himself, and the Supreme Court (as it is now) said that was sufficient to avoid tax, which led to the provisions which tax those who receive benefits, for example children whose school fees are met by the Trust.

So, what could Labour do?   The short answer is what HMRC suggest, but what they should be seeking is to tax the non-dom, as if he were me (British born and bred for many generations).

Let us consider what would happen if I had settled an offshore trust.  How would I be taxed as the settlor of a trust from which my wife and I were excluded as a beneficiary?

If I had done that, then I would be taxed on the income of the Trust and in theory the income (in practice the income profit) unless I also excluded my children until they reached the age of 18 and also capital gains unless I excluded my minor grandchildren.  

Applying this to our typical non-dom’s position, he would be taxed on the income profits of the Trust (nil) and the income of its underlying investments until his last child attained the age of 18 years.  It is highly unlikely that the non-dom is going to exclude his children from benefit.  

Taxing historic income would lead to allegations of retrospective taxation.  This is an issue of which the courts have historically had a very strong dislike.

If I were the settlor of such a trust I would be taxed on capital gains made by the trust or any company it owned  unless those gains were offshore funds gains (which are taxed as income), but not on dividends. A suggestion, for those wishing to put non-income producing assets away for the benefit of grandchildren, could be to have the trust own them via a non-qualifying offshore fund.

The worst case is that our non-dom will be taxed on trust income profits etc until his youngest child is 18 years old, and capital profits until his grandchildren are 18.

And as for inheritance tax, well trust assets would fall within the relvant property trust regime and taxed at 6% on the net value of trust assets every ten years.

But wait!

What I have described are the current rules if a non-dom were to fail one of the five tests I outlined at the beginning of this article, once he became deemed UK domiciled.   And these rules seem to work, and they seem fair to me.   Wealth earned whilst the non-dom was a non-dom remains outside the UK tax net, but if he adds to it whilst UK domiciled, they come into scope.

And if he leaves the UK, the wealth remains intact.


If you are already deemed UK domiciled, and meet the five tests above, and continue to do so and I would expect you to come to no fiscal harm.  

Otherwise, create as much clean capital as you can before 5th April 2024 as any new Government will arrive in the next tax year.

In addition, or in the alternative, consider bringing the ownership of the assets onshore under a UK limited company – the ultimate income tax blocker.  Care should be taken over the UK’s corporate tax rules, especially the Controlled Foreign Companies regime, and ensuring that assets have minimum value so as to minimise future IHT exposure.

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