‘She is losing control of the public finances and pressure is now building for yet more tax rises or spending cuts. She needs to come back to the UK and get our finances on a sustainable footing’
Rachel Reeves has announced her intention to soften the proposed tax regime on non-doms after taking into account their concerns.
Downing Street has responded, stating that this adjustment does not “change the overall approach” to the Government’s policy. The Tories said it shows that Labour’s Budget is “falling apart in front of our eyes”. Following feedback from the non-dom community, the Chancellor plans to introduce an amendment to the taxation plans for non-domiciled residents.
This amendment will expand the temporary repatriation facility, which permits non-doms to bring funds into the UK without incurring significanttaxes. This move comes amid reports from analysts suggesting that the increased taxes were driving millionaires away.
In a conversation at the World Economic Forum in Davos with the Wall Street Journal, the Chancellor explained that the tax hike on non-doms was initially aimed at generating revenue for public services. “But we have been listening to the concerns that have been raised by the non-dom community,” Ms Reeves acknowledged.
“And in the finance bill, we will be tabling an amendment which makes more generous the temporary repatriation facility, which enables non-doms to bring money into the UK without paying significant taxes.”
The Treasury maintains that the non-dom reforms will still secure the £33.8bn in tax revenue projected by the OBR, including the new amendment. Additionally, Ms Reeves mentioned she had heard worries from nations with double taxation agreements with the UK, like India, about the potential impact on inheritance tax obligations.
“That’s not the case. We’re not going to be changing those double taxation conventions. So, countries like India, non-doms from India will not be affected by the inheritance tax changes,” she said. No 10 stated that the Finance Bill would introduce the final policy but clarified that the amendment “doesn’t change the overall approach, which is that we are replacing this outdated regime”.
“It doesn’t change our approach to replacing the outdated non-dom tax regime with a new internationally competitive resident-based system that addresses unfairness in our tax system, attracts the best talent and investment to the UK and ensures that everyone who is a long-term resident of the UK pays their tax here,” the Prime Minister’s official spokesman declared.
When questioned about why the Government was accommodating wealthy non-doms while seemingly ignoring farmers’ concerns over recent inheritance rule changes, he responded, “We always engage with farmers.”
“We are listening to farmers, as the Secretary of State has done and continues to do so and the Prime Minister has obviously engaged with the sector as well,” he added.
The suggested amendment to the Finance Bill aims to extend the Temporary Repatriation Facility, allowing non-doms a three-year period to pay a reduced rate on foreign income and gains.
A Treasury spokesperson stated: “While we do not expect these changes to impact the £33.8bn of tax revenue that the OBR forecast to raise over five years, they reflect our continued engagement with stakeholders to make sure the reforms announced at Budget operate as intended.”
They also highlighted the purpose of the Temporary Repatriation Facility as being “designed to encourage non-doms to bring their funds to the UK, encouraging them to spend and invest this money here.”
Tax rises are being blamed for the UK’s loss of a considerable number of millionaires, with figures from New World Wealth indicating a net loss of 10,800 millionaires in 2024, more than double the 4,200 lost back in 2023.
Shadow chancellor Mel Stride criticizes Labour’s fiscal policies, expressing in strong terms: “Labour’s Budget is falling apart in front of our eyes.”
“At the election Labour said their plans would raise money, now they have been forced to admit their plans make the UK less attractive. But the damage is already done, tax revenue equivalent to hundreds of thousands of taxpayers has already been lost.”
“Labour simply does not understand business and the economy, and working people are paying the price. It is obvious that this Chancellor is deeply out of her depth. She is losing control of the public finances and pressure is now building for yet more tax rises or spending cuts. She needs to come back to the UK and get our finances on a sustainable footing.”
