UK’s New Tax Rules Target Non-Doms: “Should I Stay or Should I Go?”

The recent UK elections have ushered in substantial changes for Non-Dom (Non-Domiciled) individuals, particularly with the Labour Party’s proposed tax reforms. Starting April 6, 2025, the UK will transition to a residence-based taxation system, effectively abolishing the current rules governing the taxation of Non-Dom individuals. Under this new regime, residents who have been in the UK for four years or more will be taxed on their worldwide income and gains. Initially, a four-year Foreign Income and Gains (FIG) regime will apply, allowing individuals who have not been tax residents in the UK for the past ten tax years to benefit from this temporary relief. However, beyond this four-year period, all UK residents will be subject to taxation on both UK and foreign income as it arises.

This shift brings with it a host of additional implications. Even with the Temporary Repatriation Facility (TRF) in place, formerly protected foreign income and gains will remain taxable upon remittance. Returning UK individuals can also benefit from the FIG regime if they meet the residency requirements, but claiming this regime will result in the loss of entitlement to personal allowances and the annual exempt amount for Capital Gains Tax (CGT). Other significant tax changes include the introduction of a 5% Stamp Duty on second homes starting October 31, 2024, and the confirmation of 20% VAT on private school fees from January 2025. Furthermore, AIM shares will no longer enjoy full exemption from Inheritance Tax (IHT) and will now be subject to an effective 20% rate. Business Property Relief and Agricultural Relief will only provide 50% relief on values exceeding £1 million. Capital Gains Tax rates for higher-rate taxpayers will increase from 20% to 24%, while the tax on gains above £1 million from Business Asset Disposal Relief will rise from 10% to 14% in April 2025 and 18% in April 2026. Additionally, carried interest will face a heightened CGT rate of 32% from April 2025, with “simpler rules” anticipated in April 2026.

Switzerland: A compelling alternative

Amid these sweeping changes, Switzerland emerges as an especially attractive option for Non-Domiciled individuals seeking a stable and tax-efficient environment. Renowned for its political stability, exceptional quality of life, and favorable tax policies, Switzerland offers a Lump-Sum Taxation (Forfait Fiscal) system, allowing High Net Worth individuals to negotiate a fixed annual tax based on their lifestyle costs rather than worldwide income. The country provides diverse residency pathways, including options for retirees and entrepreneurs, appealing to those ready to establish roots. Switzerland’s commitment to financial privacy, its world-class banking system, and a skilled network of financial and legal professionals make it an ideal location for international wealth management. Additionally, its central European position, extensive infrastructure, and high-quality education options—including prestigious boarding schools—enhance Switzerland’s allure for Non-Doms considering a strategic relocation from the UK.

Alpen Partners International provides professional advice

As the UK tax landscape undergoes significant changes, Alpen Partners International is ready to provide expert guidance to high-net-worth individuals facing these new challenges. As an independent Swiss financial advisor and global wealth planner, we go beyond traditional wealth management to offer comprehensive support tailored to each client’s unique needs. Our services encompass strategic planning for relocation to Switzerland and other European destinations, providing guidance to help our clients prepare for this next chapter in their lives.

With our in-depth expertise, clients can smoothly transition to new residencies while maintaining their strategic financial goals amid regulatory shifts. We understand the complexities of international relocation and are dedicated to helping clients make well-informed decisions aligned with their long-term objectives. Additionally, Alpen Partners International, as an SEC-registered investment advisor, and Alpen Partners, as a Canada-licensed portfolio manager, bring specialized experience in serving American and Canadian clients, delivering solutions that ensure regulatory compliance across borders.

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