If you’re a British expat living overseas, or if you reside in the UK but were born abroad, you may have previously qualified as a “non-dom.”
Under the former non-dom regime, individuals were typically only liable for UK tax on income and assets based within the UK. This meant that many people were able to reduce their overall tax bill by claiming domicile in a country with lower taxes.
For example, British expats with overseas property often benefited from more favourable Inheritance Tax (IHT) rules in their country of residence compared to those in the UK.
However, from 6 April 2025, the UK abolished the long-standing non-dom tax regime and introduced a new residence-based system. While there is a transitional period for existing non-doms, the changes mean that a wider range of foreign-held assets may now fall within the scope of UK taxation, while others may no longer be taxed.
If you’re a British expat or a foreign national with UK-based assets, these changes could have significant implications for your financial plan.
Read on to find out how the new non-dom rules could affect you.
The non-dom tax regime is being phased out
In March 2024, former Chancellor Jeremy Hunt announced plans to phase out the UK’s non-domicile (non-dom) tax regime. These reforms were later backed by current Chancellor Rachel Reeves, with the Labour Party reaffirming its commitment to the changes in the Autumn Budget.
Under the previous system, non-doms could exclude foreign income and capital gains from UK taxation, provided those funds were not brought into the UK. However, from April 2025, a new residence-based tax regime came into effect, replacing domicile status with a focus on long-term residency.
Key elements of the new rules include:
- Worldwide taxation for UK residents: All UK residents are now subject to UK tax on their worldwide income and gains, regardless of their domicile status.
- 10-Year foreign residency requirement: British nationals and former UK residents who claim foreign domicile must now live outside the UK for at least 10 consecutive years before their non-UK-sited assets fall outside the scope of UK tax. UK-sited assets will continue to be subject to UK IHT.
- New definition of UK residence status: The concept of domicile has been replaced with long-term residence (LTR). Individuals who have lived outside the UK for at least 10 of the last 20 years will now be classified as non-UK LTRs.
- Temporary tax exemption for new arrivals: New arrivals to the UK will benefit from a four-year exemption on foreign income and gains. After this period, they will be taxed in full as UK residents.
- Three-year transition period for existing non-doms: Those who previously held non-dom status will have a three-year transitional period, during which they are encouraged to repatriate overseas wealth under more favourable tax terms.
If you have international assets, it could be a good idea to speak to a financial planner to understand how the new rules may affect your personal situation.
The new non-dom rules could affect your pensions and Inheritance Tax planning
In addition to the abolition of the non-dom tax regime, the UK’s Autumn Budget introduced a series of significant reforms that could fundamentally impact how former non-doms manage their pensions and IHT exposure.
One key change is that, from 2027, most pensions will be brought within the scope of UK IHT. This means that individuals who hold a UK pension but live abroad may wish to review their arrangements to help mitigate potential IHT liabilities for their beneficiaries.
Furthermore, under the new rules, foreign assets will be subject to IHT for individuals who have been UK tax residents for at least 10 out of the previous 20 tax years. This applies to both foreign nationals living in the UK and British expats living overseas. These individuals may continue to be liable for UK IHT on their worldwide assets for up to 10 years after leaving the UK, a provision often referred to as the “IHT tail.”
The length of this IHT tail is based on the number of UK-resident years within the preceding 20 before departure. The longer the period of prior residence, the longer the individual may remain within the IHT net post-departure. Current thresholds and tapering rules are detailed in the table below.
| Number of years of UK residence in the previous 20 years | Duration of IHT tail after leaving |
| Fewer than 10 | None |
| 10 to 13 | 3 tax years |
| 14 | 4 tax years |
| 15 | 5 tax years |
| 16 | 6 tax years |
| 17 | 7 tax years |
| 18 | 8 tax years |
| 19 | 9 tax years |
| 20 | 10 tax years |
| 21+ | 10 tax years |
Source: London and Capital
A financial planner can help ensure you remain tax-efficient under the new rules
If you’re concerned about how the new rules could affect you, a financial planner can help.
They can work with you to develop a tailored strategy to keep your worldwide assets and income as tax efficient as possible, both in the UK and in your country of residence.
To speak to a financial planner, get in touch.
Email us at hello@vwmwealth.com or call us on 0141 229 4004.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, trusts, Lasting Powers of Attorney, or will writing.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
