Speaking at the World Economic Forum in Davos, she committed to tabling an amendment to the Finance Bill which could remove some of contentious elements of its changes to non-dom taxation though there is little detail to go on.

Reeves is widely quoted as saying that “we have been listening to the concerns that have been raised by the non dom community”.

In early reaction amid scant detail on what tweaks she might make, Stephen Kenny, head of private client at audit and accountancy firm PKF Littlejohn said: “This very much feels like too little too late. The changes to the non-dom rules were first announced by the previous government in March 2024. Since then, many in the industry raised the likely impact these changes would have, and the new government has had the opportunity to reassure the internationally mobile community that the UK is open for business. But they have not heeded the warning until too late.

“Having worked with non-domiciled High Net Worth individuals for most of my career one of the key benefits the UK used to offer was certainty and a stable tax regime. This has been eroded by successive changes to the non-dom regime which have, for the most part, have not been managed as effectively as they could have been. The feedback I get from people wanting to leave the UK is that they are not only unhappy because of changes in the tax regime but because they have no confidence that it won’t change further in the future.

“I doubt this announcement will do much to change people’s opinion. If the government is serious about keeping the UK open for business they should be taking the opportunity to engage with advisors to create a fair regime that will work for the UK and allow people to effectively plan for the future.”

Anthony Whatling, managing director at Alvarez & Marsal Tax, said: “The announcement by Rachael Reeves that the Government will introduce amendments to the proposed non-dom changes is very welcome. It is reassuring to hear that the Government is listening to the concerns raised by non-doms and industry experts about the potential exodus of wealthy individuals from the country.

“However, it appears that the only amendment planned is to extend the “temporary repatriation facility,” allowing taxpayers to bring their historic income and gains to the UK at a reduced tax rate. While we await the specifics of these changes, it is doubtful that this measure alone will significantly stem the outflow of wealthy non-doms.

“A major concern remains that limiting tax benefits to the first four years in the UK makes the country relatively unattractive. Extending this four-year limit for new arrivals, perhaps in conjunction with an annual tax charge similar to the successful Italian regime, could better attract and retain internationally mobile ultra-high-net-worth individuals who contribute significantly to the local economy.”

Charlie Sosna, Head of Private Wealth and Tax at Mishcon de Reya, said: “Clients in and outside the UK will welcome the statements from the Chancellor. There has certainly been a feeling amongst many clients that the rules as proposed do not make the UK an attractive place for them to remain.

“Many significant clients have looked to relocate to their home countries, or other countries looking to attract their talent and wealth (such as Italy, Switzerland and Monaco). We certainly have many client families and their family offices who wish to review their position in the UK and are seeking assistance in relocating to other jurisdictions as a response to the abolition of the ‘non-dom’ regime’.

“It is important to remember that these clients do, and are very happy to, contribute and pay their way in society. However, the Government must balance that against offering a regime that entices them to relocate to or stay in the UK rather than simply remain in their home countries.

“Separately, the new rules have not gone far enough to entice many entrepreneurs and wealth makers to relocate themselves, their businesses and their families, from their home countries or elsewhere to the UK. Instead, they have created a regime that could attract people to come to the UK for a short period of time, contribute very little if anything in tax contribution to the UK, and then look to leave the UK once their favourable tax position ends. As a result, we have seen a slowdown in those looking to relocate to the UK with many looking at the UK with some scepticism and querying whether they and their businesses are truly welcome here.

“Given the Government’s desire to attract these people, it is understandable that they have taken stock of the reaction and decided to act to minimise the loss of these individuals and seek to convince those abroad that the UK is where they want to live and invest. We welcome any changes the Government may introduce to address these issues and ensure there is a regime where all contribute to society and ‘pay their way’, but in a way that incentivises them, their families and their businesses and investment to pick up sticks and come to, and remain in, the UK.”

Carol Katz, partner in the Private Wealth and Tax group at Mishcon de Reya, added: “In terms of the impact of the current proposed rules on the internationally mobile, we have seen an increase in the number of enquiries from existing and new clients who are looking to relocate out of the UK: the departure lounge is very much fuller than arrivals at present!

“Expanding the temporary repatriation facility could encourage more people to stay in the UK as the reduced tax rate (either 12% or 15%, depending on the year in which it is designated) is a significant carrot with which to encourage people to bring funds here to settle for the long term. Our clients would want to see the detail before changing their plans and time is running out.

“The new regime will be attractive to people looking to stay in the UK for only a short period in order to take advantage of four years of 100% tax relief on their foreign income and gains. However, four years is a short time to base a decision to relocate a family, with many people looking at Italy, Switzerland and Dubai as alternatives to the UK.”

Marc Acheson, global wealth specialist at Utmost Wealth Solutions, said: “The measures announced at the Budget made the UK far less attractive to non-doms and created the perfect storm of many leaving and less coming in. The replacement of the current remittance basis with the new 4-year foreign income regime encouraged the wrong type of behaviours and gave little incentive for people to come to the UK and establish long-term roots.

“Many of our clients have been exploring other jurisdictions in the EU and UAE. This community would rather not leave the UK and contribute significantly to the exchequer, so any review of those changes, particularly with reference to the erosion of IHT protections on existing settlements would be welcome.”

Rachel De Souza, tax partner at audit, tax and consulting firm RSM UK, said: “I welcome Rachel Reeves’ acknowledgement that concerns have been raised by the non-dom community to the changes due to come in on 6 April. Whilst an increase to the temporary repatriation facility must be a good move, it is woefully inadequate to prevent wealthy non-dom and British entrepreneurs from leaving the UK.

“The way to stem this exodus would be to maintain the exemption from IHT to offshore trusts but also reverse the proposed changes to agricultural and business property relief which impacts the farmers and entrepreneurs.”

Philip Munro, partner at Withers on whether they could change wealthy people’s attitude to staying in the UK: “As set out in the 2024 Budget, the new rules will be available for a limited period from 2025 to 2026.

“The tax rate will be 12% for the first two years and 15% in the final tax year of operation. This may be helpful to some individuals who have previously claimed the remittance basis, but it is unlikely that revisions to the terms will impact on the decision-making where individuals are considering leaving the UK.

“The decision to leave the UK and to be non-resident is generally taken for one or both of two reasons:

1. One is simply that a move to worldwide taxation on income and gains in the UK is not acceptable. There are many countries which offer lower tax rates and can incentivise entrepreneurs to relocate to them. The non-dom tax reforms only offer a four-year period during which full UK tax is not applicable and that is only for those who are moving to the UK (and generally not to those already living here); and
2. Inheritance tax – there may be a positive incentive to leave the UK now in many cases to avoid a 40% inheritance tax exposure applying on worldwide assets. The non-dom tax reforms have a potential IHT ‘tail’ of up to 10 years for those who leave the UK in the future and this may well be unacceptable to many wealthy and internationally mobile individuals.

“If the Government wants to stop non-dom individuals leaving the UK, measures on these points would also be required.”

Mauro De Santis Bo, partner at GSB Wealth said: “The proposed softening of the non-dom rules is likely aimed at preventing the loss of high-net-worth individuals who contribute significantly to the UK’s economy.

“By extending the temporary repatriation facility to three years and slightly lowering the tax burden during this period, the government is sending a signal that the UK remains a welcoming place for global wealth. Although this may look like it is going to help retain wealthy individuals who might otherwise move their funds elsewhere, I believe that is only helping those non-doms that are already thinking of staying and they have been lobbying intensively over the past months to make the new rules slightly more favorable for them.

“There’s no denying that the initial uncertainty and proposed tightening of the non-dom regime have already pushed some individuals to leave the UK or reconsider their long-term commitment to the country. Wealthy individuals value stability and clarity in tax policy, and many will have already acted on the earlier announcements, relocating funds or even themselves to jurisdictions with more predictable regimes.

“This softening can be seen as a positive step, but for those who have the decision of leaving or already left, it may be too late to reverse their decisions and I doubt this ‘softening’ will be enough to make them change their minds. The UK now faces a challenge in rebuilding trust among this community and demonstrating that it can balance fiscal needs with a competitive, business-friendly environment. Timing is everything, and a stronger, clearer commitment to welcoming global wealth sooner could have mitigated the damage.”

While new arrivals will pay no additional tax for the first four years, after this period, they will be taxed the same as other UK residents. Hunt said transitional arrangements will be put in place for those under the current regime, including a two-year transition period.

Hunt said the change in regulation will bring in £2.7bn each year.

Non-domiciled tax currently allows some residents to claim their permanent home abroad, which excludes them from paying tax on money made outside the UK while still living in the country. ‘Non-doms’ can also invest money offshore, which remains untaxed in the UK. This can be done on a remittance basis, which can be claimed on income over £2,000 but can cause a loss of tax-free allowances for income tax and capital gains tax.

After non-doms have been in the UK for seven of the past nine tax years, they will be charged £30,000 annually for this remittance and £60,000 after being in the UK for 12 of the past 14 tax years.

A study by the London School of Economics in 2022 showed a complete elimination of tax loop on this income would bring over £3.2bn in tax revenue each year. On average, it saves ‘non-doms’ over £125,000 through income and capital gains tax each year, according to the study, resulting in an average £420,000 left unreported. In addition, 55% of unreported income and gains belong to those who have lived in the UK for less than five years.

One of the main concerns of ousting the regulation is non-doms leaving the UK without the rule in place. The London School of Economics research estimated that .3%, or less than 100 people, would leave the country because of this change.

David Burgherr, research officer at London School of Economics’ International Inequalities Institute, said one in 16 non-doms report no income in the UK, and averaged earning £450,000 abroad.

Claire Trott, divisional director for retirement and holistic planning at St James’s Place, said: “The scrapping of the non-dom status is estimated to bring over £2.7bn of extra tax revenue which will be used to fund the other tax cuts announced in the Budget.

“Moreover, this was one of Labour’s proposed changes so the Conservatives taking this “tax windfall” from Labour’s calculations will certainly hamper their proposed spending. If Labour do win the next election, they will have to consider what to do about this budget hole the Conservatives will have left them. They will have to choose whether to change where the saving is spent, or to just try and fulfil their spending plans in other ways.”

Sophie Dowretzsky, partner at law firm Charles Russell Speechlys, said she found the abandonment of the regime “slightly surprising” because of Hunt’s previous attitude towards scaling it back.

“Whilst he has promised an alternative system that is fairer and competitive, an absolutely crucial aspect of any changes is to ensure that they are clear, bring stability and create an attractive regime for wealth creators considering a move to the UK,” Dowretzsky said.

“The details of the new proposed regime are yet to be clear, but reducing the time period for which there are tax advantages for new arrivals to 4 years seems uncompetitive. On the upside it is good news that it seems the new rules will encourage inward investment of offshore income and gains which currently cannot be easily and tax efficiently invested onshore. A key question is how transitional arrangements will work.”

This article was written for our sister title Portfolio Adviser

STS Europe advises clients including UK-resident non-domiciles on matters such as inheritance tax, trusts and offshore structures, and also assists offshore banks and trust companies throughout Europe with UK tax issues.

The deal enables the retirement of owner Andy Sharp.

The acquired firm will now become part of DSW Tax Advisory, Dow Schofield Watts’ tax practice. It will remain in its Burscough office and will operate as DSW STS in the immediate future.

STS director Andrew Robinson will become a partner in DSW Tax Advisory.

Dave Waddington of DSW Tax Advisory, said: “STS has built a strong reputation for its work with high-net-worth clients and offshore trusts.

“The acquisition will bring additional expertise to DSW Tax Advisory and enable us to expand the range of services we offer. We are delighted to welcome Andrew on board.”

This is a 60% increase from 10 years ago when the average amount of tax paid by a non-dom individual was £76,000, the law firm Pinsent Masons reported.

The total amount of tax paid by non-doms overall has risen by 8% in the past year to £8.49bn ($10.9bn, €9.9bn). The data also shows that the amount of capital gains tax paid by non-doms rose 56% in the last year alone to £526m.

Sophie Warren, tax manager at Pinsent Masons, said: “Non-doms now more than ‘pay their way’ in the British economy. HMRC now brings in more in tax from non-doms than it does from inheritance tax or customs duties.

“The rise in tax paid by non-doms suggests that the cost of living crisis has affected them to an extent too. As many non-doms pay tax on money they remit to the UK, it’s likely that more of them are having to send money here from overseas to pay for increased costs.

“The big jump in CGT paid by non-doms is likely down to them selling UK property portfolios as residential property investment becomes less profitable. A lot of that money that will make its way into other parts of the UK economy through investment in other areas outside property.”

This news comes after Pinsent Masons reported back in January 2023 that the number of new non-dom taxpayers in the UK dropped by 40% in the past year.

A UK resident non-dom is a person who is resident in the UK but does not intend to live in the UK permanently and so, for tax purposes, is not considered to be domiciled in the country.

The total number of non-doms in the UK has fallen by 11% to 68,300 in the most recent year data is available, which is the 2020-21 financial year.

The sum of tax paid by non-doms fell by £2bn to £7.65bn ($9.3bn, €8.72bn) in 2018, following Brexit and non-dom tax reforms which made the UK’s non-dom regime less generous.

There has been debate on whether the government should limit the non-dom tax status. Non-doms pay tax on their UK income and on money they bring to the UK but do not pay tax on other income and capital gains that they make outside of the UK.

Sophie Warren, tax investigations expert at Pinsent Masons, said : “Non-doms make a highly valuable contribution to the UK economy and any substantial falls in their number could have a significant long-term impact. The government needs to consider what it may lose by placing their status under threat.

“Many non-doms are highly successful entrepreneurs which have established or invested in UK companies. The availability of non-dom status gives the UK a competitive advantage in attracting talented and wealthy individuals. Altering this status now would cause many to consider relocating.”