Shorter Reads

Is the Government set to U-Turn on its Non-Dom Tax Policy?

Press reports suggest the Government is now re-thinking the “Non-Dom” tax policy changes to which the Labour Party committed in its General Election Manifesto earlier this year.

Private Wealth Partner, James Austen, provides comment.

2 minute read

Published 27 September 2024

Authors

Share

Key information

Press reports (for example BBC News, and Financial Times) suggest the Government is now re-thinking the “Non-Dom” tax policy changes to which the Labour Party committed in its General Election Manifesto earlier this year. We will analyse and comment on developments in the Government’s policy fully as more details emerge – at the Budget on 30 October, if not before.

Meanwhile, if the reports on the apparent “U-turn” in the Government’s approach to the taxation of Non-Doms are accurate, the Chancellor and her Treasury officials are finally taking seriously what tax lawyers have been saying for months: a punitive tax policy on wealthy internationally-mobile residents – and those who might otherwise move to the UK – will be self-defeating in its effect on the Exchequer. Realisation may finally be dawning that we weren’t making it up. As the BBC report states: “While no specific policy has been put to the OBR as part of the Budget process, Treasury officials acknowledge that scrapping two concessions made by the previous government might not raise the £1bn they thought it would, or indeed any money at all.”

It seems that the Government is now moving towards the tax strategy proposed by the Conservative Party in the dying months of the last Government, and shorn of the additional changes proposed in Labour’s Manifesto – including scrapping the plan to change the IHT treatment of widely-used ‘excluded property trusts. We said at the time that Labour’s original proposals were fraught with technical difficulties, aside from the uncertainty about their effectiveness in generating additional tax revenue: it may be that the Treasury mandarins are privately recognising the truth of that now, too. Nevertheless, the details are presently few and vague, and affected taxpayers must remain in limbo for a while longer yet.

Meanwhile, as other recent press reports have indicated, the Government’s negativity about its plans for a “painful” Budget next month (including its politically-driven campaign about Non-Doms) are “weighing on the UK economy”, as the Guardian put it. Having recently endured a torrid few weeks of self-inflicted negative reporting, this is all most embarrassing for Sir Kier Starmer’s Government.

Regrettably, even if a welcome U-turn on Non-Dom tax does come, it will be too late to prevent the damage that has already been done to the UK’s reputation as a jurisdiction of choice for wealthy international people to make their homes and businesses. As tax lawyers have been saying throughout the recent political attention on Non-Doms, many such clients have already left the UK or are taking steps to leave before 6 April 2025: it seems unlikely that they will be persuaded to stay by a late change of heart now. Worse, those who might otherwise have been attracted to the UK will be wary of further changes to the Government’s plans in the future: legal and tax stability are of paramount importance in attracting inward investment, whilst uncertainty (on which the UK already had a poor track record) is one of the biggest “push” factors making a country unattractive.

At best, the Government must hope its late realisation that a punitive tax policy harms the UK economy (and reduces the Government’s tax-take) will prevent further immediate damage to the UK’s international reputation. But to repair the reputational damage and generate additional taxation to fund the Government’s domestic policy objectives, a lengthy period over which positive steps are taken to attract potential taxpayers will be necessary. Helpfully, there are good examples of effective tax and immigration policies in other G7 countries (e.g., the USA and Italy) which the UK could adapt and implement to meet its own need – provided that the Government has the political will to implement such a programme. It remains to be seen whether or not it does.

The Government must decide whether it is serious about generating additional tax revenue by growing the UK economy – including by attracting wealthy taxpayers here – or whether instead it wants to pursue a self-defeating agenda by which it makes the UK unattractive to current and potential investors who can choose to go elsewhere: it cannot do both.

Related latest updates
PREV NEXT

Related content

Arrow Back to Insights

Shorter Reads

Is the Government set to U-Turn on its Non-Dom Tax Policy?

Press reports suggest the Government is now re-thinking the “Non-Dom” tax policy changes to which the Labour Party committed in its General Election Manifesto earlier this year.

Private Wealth Partner, James Austen, provides comment.

Published 27 September 2024

Associated sectors / services

  • UK trusts, tax and estate planning

Authors

Press reports (for example BBC News, and Financial Times) suggest the Government is now re-thinking the “Non-Dom” tax policy changes to which the Labour Party committed in its General Election Manifesto earlier this year. We will analyse and comment on developments in the Government’s policy fully as more details emerge – at the Budget on 30 October, if not before.

Meanwhile, if the reports on the apparent “U-turn” in the Government’s approach to the taxation of Non-Doms are accurate, the Chancellor and her Treasury officials are finally taking seriously what tax lawyers have been saying for months: a punitive tax policy on wealthy internationally-mobile residents – and those who might otherwise move to the UK – will be self-defeating in its effect on the Exchequer. Realisation may finally be dawning that we weren’t making it up. As the BBC report states: “While no specific policy has been put to the OBR as part of the Budget process, Treasury officials acknowledge that scrapping two concessions made by the previous government might not raise the £1bn they thought it would, or indeed any money at all.”

It seems that the Government is now moving towards the tax strategy proposed by the Conservative Party in the dying months of the last Government, and shorn of the additional changes proposed in Labour’s Manifesto – including scrapping the plan to change the IHT treatment of widely-used ‘excluded property trusts. We said at the time that Labour’s original proposals were fraught with technical difficulties, aside from the uncertainty about their effectiveness in generating additional tax revenue: it may be that the Treasury mandarins are privately recognising the truth of that now, too. Nevertheless, the details are presently few and vague, and affected taxpayers must remain in limbo for a while longer yet.

Meanwhile, as other recent press reports have indicated, the Government’s negativity about its plans for a “painful” Budget next month (including its politically-driven campaign about Non-Doms) are “weighing on the UK economy”, as the Guardian put it. Having recently endured a torrid few weeks of self-inflicted negative reporting, this is all most embarrassing for Sir Kier Starmer’s Government.

Regrettably, even if a welcome U-turn on Non-Dom tax does come, it will be too late to prevent the damage that has already been done to the UK’s reputation as a jurisdiction of choice for wealthy international people to make their homes and businesses. As tax lawyers have been saying throughout the recent political attention on Non-Doms, many such clients have already left the UK or are taking steps to leave before 6 April 2025: it seems unlikely that they will be persuaded to stay by a late change of heart now. Worse, those who might otherwise have been attracted to the UK will be wary of further changes to the Government’s plans in the future: legal and tax stability are of paramount importance in attracting inward investment, whilst uncertainty (on which the UK already had a poor track record) is one of the biggest “push” factors making a country unattractive.

At best, the Government must hope its late realisation that a punitive tax policy harms the UK economy (and reduces the Government’s tax-take) will prevent further immediate damage to the UK’s international reputation. But to repair the reputational damage and generate additional taxation to fund the Government’s domestic policy objectives, a lengthy period over which positive steps are taken to attract potential taxpayers will be necessary. Helpfully, there are good examples of effective tax and immigration policies in other G7 countries (e.g., the USA and Italy) which the UK could adapt and implement to meet its own need – provided that the Government has the political will to implement such a programme. It remains to be seen whether or not it does.

The Government must decide whether it is serious about generating additional tax revenue by growing the UK economy – including by attracting wealthy taxpayers here – or whether instead it wants to pursue a self-defeating agenda by which it makes the UK unattractive to current and potential investors who can choose to go elsewhere: it cannot do both.

Associated sectors / services

  • UK trusts, tax and estate planning

Authors

Need some more information? Make an enquiry below.

    Subscribe

    Please add your details and your areas of interest below

    Specialist sectors:

    Legal services:

    Other information:

    Jurisdictions of interest to you (other than UK):



    Article contributor

    Enjoy reading our articles? why not subscribe to notifications so you’ll never miss one?

    Subscribe to our articles

    Message us on WhatsApp (calling not available)

    Please note that Collyer Bristow provides this service during office hours for general information and enquiries only and that no legal or other professional advice will be provided over the WhatsApp platform. Please also note that if you choose to use this platform your personal data is likely to be processed outside the UK and EEA, including in the US. Appropriate legal or other professional opinion should be taken before taking or omitting to take any action in respect of any specific problem. Collyer Bristow LLP accepts no liability for any loss or damage which may arise from reliance on information provided. All information will be deleted immediately upon completion of a conversation.

    I accept Close

    Close
    Scroll up

    Find out about Business

    Find out about Dispute Resolution

    Find out about Individuals & Families

    Find out about Real Estate

    We are Collyer Bristow - The law firm for those that
    value individuality, creativity and collaboration.

    Legal & Pricing info Regulatory InformationAccessibilitySitemapPricing and service information

    Listen to our latest podcast: Budget Miniseries: Impacts on Families with US Connections (Part 1)

    Listen to our latest podcast: Cracking the Code on Directors’ Service Agreements

    Read our latest article: Economist, or just economical with the truth? How can employers respond to ‘fake claims’ on a CV?

    Listen to our latest podcast: Autumn Budget 2024 Special (Part 2)

    Read our latest article: ‘Promoting the integrity of the register’: The new Companies House approach to non-compliance

    ExpandNeed some help?Toggle

    < Back to menu

    I have an issue and need your help

    Scroll to see our A-Z list of expertise

    Get in touch

    Get in touch using our form below.



      Business Close
      Private Wealth Close
      Hot Topics Close