Rachel Reeves is to water down her crackdown on the non-dom tax status after analysis showed it had prompted an exodus of millionaires.
The chancellor said she would be tabling an amendment to the plans after “listening to the concerns” of non-domiciled residents.
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The announcement was welcomed by tax advisers – but one expert told Sky News that the government should go further and make it easier for wealthy people to move to the UK, especially in light of the Trump presidency.
“Non-dom” status allows someone who lives in the UK to avoid paying tax on money made abroad because their permanent home is considered outside of the country.
Labour’s manifesto vowed to abolish the status to “address unfairness in the tax system” and raise funds for public services.
The planned changes relate to rules governing the “temporary repatriation facility” – a transition window which will allow non-doms to bring overseas income into the UK and pay a reduced tax rate.
The arrangement was due to last for three years from April 2025, as announced in the October budget.
However, speaking at the World Economic Forum in Davos, Ms Reeves said she would be making this more generous.
She told the Wall Street Journal: “We have been listening to the concerns that have been raised by the non-dom community.
“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.”
Ms Reeves extended the two-year transition window that the Conservative government had planned to three years in her budget back in October.
‘Millionaire exodus’
The new extension comes after analysts found over 10,000 millionaires left the UK in 2024, a 157% increase on 2023 – meaning the UK lost more wealthy residents than any other country except China.
The research, conducted by global analytics firm New World Health and investment migration advisers Henley & Partners, shows the UK became a net outflow country of millionaires after the Brexit vote in 2016, but the big haemorrhage happened last year.
Up until 2016, the UK had always been a net inflow country when it came to high-net-worth individuals.
Peter Ferrigno, group tax director at Henley & Partners, told Sky News today’s announcement shows the government had listened to warnings that “people can leave and will leave if they feel like they are being unfairly treated”.
However, while welcoming the changes, he said there needs to be “joined up thinking with migration rules” so it is easier for millionaires to come here and contribute to the economy.
He said millionaires were “leaving anyway” because of Brexit and the “perception that things weren’t working” – but Donald Trump’s presidency in the US is a chance to attract some back.
‘Skewered priorities’
Controversy over non-doms erupted in 2022 when it emerged Rishi Sunak’s wife Akshata Murty, the daughter of an Indian billionaire, had the tax status.
After the row she said she would start paying taxes on her overseas income as she did not want to be a “distraction” from her husband – then the prime minister.
Labour repeatedly used the issue to attack the Tories while in opposition, and scrapping the status was a centrepiece of their election campaign, promising to use the £1bn a year proceeds to fund NHS and dental appointments, and school breakfast clubs.
Downing Street said the move does not “change the overall approach” to the government’s policy, which is to replace non-doms with “a new internationally competitive resident-based system”.
But Carla Denyer, co-leader of the Green Party, accused the government of “totally skewed priorities” after it refused to row back down on its cut to winter fuel payments.
And the Tories said that Labour’s budget was “falling apart in front of our eyes”, with Ms Reeves “forced to admit” her plans to raise money “make the UK less attractive”.
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Sky News spoke to Chancellor Rachel Reeves at the World Economic Forum summit in Davos and asked her how she will attract foreign investment
A Treasury spokesperson said: “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.
“The temporary repatriation facility is designed to encourage non-doms to bring their funds to the UK, encouraging them to spend and invest this money here.”
