BackThe UK non-dom regime is a tax regime characterised by the absence of taxation of income received from abroad, except for income remitted to the UK, whereby capital gains arising in the UK are taxed exclusively for a period of seven years.
In recent months, the debate on a possible reform of this attractive tax regime has been on the table in the UK.
In particular, it has been announced that the current regime, at least with the benefits it had, will come to an end on 6 April 2025.
The details of the coming regime and its implications for UK taxation are still unknown, but are expected to be significant and extensive.
The end of this tax regime as it has been known until now is expected to bring an end to the absence of taxation solely on income received abroad (“remittance basis”).
Its replacement will be a residence-based test, which will allow individuals moving to the UK to be taxed only on their UK source income and gains for the first four tax years, with no UK taxation on foreign income and gains arising in those years, even if brought to the UK.
This tax regime, which previously could be enjoyed for a period of seven years, now rivals the Special Regime known in Spain as the Beckham Law, which, far from decreasing, has actually increased its term.
Under this “Beckham Law” tax regime, those who meet the requirements to qualify for it will enjoy six years: the year of acquisition of tax residence, plus the following five years.
On the other hand, the UK non-domiciled tax regime requires individuals to be tax resident in the UK for four years after a period of 10 consecutive tax years of residence outside the UK.
In contrast to this requirement, the Beckham Law in Spain requires a period of non- residence in Spanish territory prior to becoming resident in Spain of five years (prior to its last reform, this was also ten years).
From 6 April 2025, once a person has been resident in the UK for more than four years, they will no longer be able to rely on this four-year regime and will be taxed on their worldwide income and gains.
For non-UK resident individuals who are not eligible for the four-year regime (i.e. who will be taxed on the income basis from 6 April 2025), the following specific transitional provisions will apply:
Those moving from the remittance basis to the derived basis in 2025/26 will only be taxed on 50% of their foreign income in the 2025/26 tax year;
Those who have previously applied the remittance basis will be able to bring previously unremitted foreign income and gains into the UK at a reduced tax rate of 12% for a period of two years from 6 April 2025 – the “temporary repatriation facility”; and
Individuals can revalue their assets to their 5 April 2019 value for disposals after 6 April 2025.
Other changes expected to be affected by the end of this special UK tax regime include changes to UK Inheritance Tax, which are still being assessed.
Furthermore, it should be borne in mind that the general election to be held in early 2025, before the end of the UK four-year regime, may further change the final status of this regime.
The changes that will take place in this regime will undoubtedly have repercussions for the other competing regimes, such as the Portuguese and Spanish regimes.
For its part, the special tax regime applicable to workers, professionals, entrepreneurs and investors posted to Spanish territory, known as the Beckham Law in Spain, has become a more competitive regime following the latest reform, for the following reasons:
- It increased its duration from five to six years;
- It reduced the period of tax residence abroad to qualify for the regime from ten to five years.
If you have any questions about this special tax regime, please do not hesitate to contact us. At B LAW & TAX we are experts in international taxation.
B Law & Tax International Tax & Legal Advisors.
“En B LAW&TAX somos especialistas en asesoramiento fiscal internacional tanto a empresas como para particulares. Si desea ampliar la presente información, estaremos encantados de poder atenderle en el 917817194 o en [email protected]”
