Reeves’ non-dom backtrack is missed opportunity to stop millionaires’ exodus: deVere

Rachel Reeves may have thought her Davos non-doms remarks would reassure the market, but they’ve only added fuel to the fire of disappointment over Labour’s non-domicile tax policy changes.

Reports of a potential “softening” of the Temporary Repatriation Facility (TRF) have done little to alleviate mounting concerns about the UK’s diminishing attractiveness to wealthy foreign nationals.

Darren Jones, Head of Global Technical Development at global financial advisory giant deVere Group, commented: “I don’t see these amendments moving the dial in terms of the UK’s appeal to foreign nationals.

“Amendments to the proposed TRF flat tax rates, while a step in the right direction, remain too limited in scope and duration.

“We’d need a viable Inheritance Tax (IHT) shelter for assets accumulated prior to UK residency and an extension of the Foreign Income and Gains (FIG) regime beyond its current 4-year cap. Perhaps a flat tax rate, akin to that of the TRF, for several additional years could provide a meaningful incentive.

“But given Labour’s constrained ability to raise revenue elsewhere, I’m sceptical this will happen.”

The amendments to the TRF—rumoured to include easier access and possibly lower flat tax rates—fail to address the underlying challenges driving a mass exodus of high-net-worth individuals (HNWIs).

Key factors influencing this trend include:

1. The removal of the remittance basis of taxation, which previously allowed up to 15 years of income and capital gains tax exemptions on foreign income and gains. The new rules limit this to just 4 years.
2. The introduction of IHT on the global estates of non-doms after 10 years of UK residency, retroactively impacting those approaching or exceeding the threshold. Even after leaving the UK, a 10-year tax ‘tail’ ensures non-doms are still subject to significant tax obligations.
3. The erosion of tax planning opportunities through stricter trust rules, coupled with a global trend of tax-free or tax-efficient jurisdictions such as the UAE, Italy, Switzerland, and Portugal outshining the UK.

Darren Jones continues: “The UK’s policies now disincentivize foreign nationals from staying longer than the initial four years allowed under the FIG regime.

“And let’s not forget, the UK’s current framework unintentionally makes it a short-term haven for those looking to realise foreign gains tax-free, rather than fostering long-term economic contributions.”

The implications stretch beyond foreign nationals.

“How many wealthy UK nationals will also realise they can take advantage of Non-Long Term Resident status by simply leaving the UK for 10 years?” he questions.

“This mass exodus is not only likely to snowball but also to include those who recognise the growing advantages of spending a decade or more abroad and reclassifying as Qualifying New Residents when returning to the UK.”

While Reeves’ remarks hint at flexibility within the TRF framework, there is little indication of a broader reconsideration of policies that are driving wealth, investment, and talent out of the UK.

Without addressing the core issues—namely the punitive IHT measures and the restrictive FIG timeline—the UK risks further damage to its economic competitiveness and global appeal.

The clock is ticking as 6th April 2025 approaches.

Will Labour heed the warning signs and implement substantive changes, or will the exodus continue to escalate?

“For now, the sentiment among foreign and UK HNWIs alike seems clear: the grass is greener elsewhere,” concludes Darren Jones.