Rachel Reeves, Chancellor of the Exchequer, went ahead as promised in October 2024 with abolishing the non-dom system, which dates back to the late 18th century. To the concern of people advising HNW and UHNW individuals using this status, she did not soften the blow of the change, such as the key issue of inheritance tax on worldwide wealth. Figures show there has been an exodus of wealthy people from the country, hitting tax revenues.

However, with the government facing a possible need for spending cuts and tax hikes in the spring to appease nervous investors, it looks as though Reeves is trying to change course. Media reports (The Times, Independent, 23 January) said one planned change will be to expand the temporary repatriation facility, which lets non-doms bring income and capital gains into the UK with a minimal tax bill. 

Speaking on the sidelines of the World Economic Forum annual conference in Davos, Switzerland, Reeves was quoted as saying: “There’s been some concerns from countries that have double taxation conventions with the UK, including India, that they would be drawn into paying inheritance tax. That’s not the case: we are not going to be changing those double-taxation conventions.”

The previous Conservative government, swept out of power on 4 July, had also promised to end the non-dom system and replace it, in part to undermine the Labour Party’s ability to use special tax status for wealthy foreigners as an issue. Reeves has pledged to bring in a new, residency-based tax code with a four-year temporary exemption for people bringing wealth into the country who have resided outside it for at least 10 years. Debate continues on how the new system will fare compared with the non-dom model, and whether a four-year relief period is too short, given competition from rival jurisdictions.

“This very much feels like too little too late. The changes to the non-dom rules were first announced by the previous government in March 2024,” Stephen Kenny, private client specialist at leading accountancy firm , said. 

"Many significant clients have looked to relocate to their home countries, or other countries looking to attract their talent and wealth (such as Italy, Switzerland and Monaco). We certainly have many client families and their family offices who wish to review their position in the UK and are seeking assistance in relocating to other jurisdictions as a response to the abolition of the 'non-dom' regime'," Sosna continued. 

"Separately, the new rules have not gone far enough to entice many entrepreneurs and wealth makers to relocate themselves, their businesses and their families, from their home countries or elsewhere to the UK. Instead, they have created a regime that could attract people to come to the UK for a short period of time, contribute very little if anything in tax contribution to the UK, and then look to leave the UK once their favourable tax position ends. As a result, we have seen a slowdown in those looking to relocate to the UK with many looking at the UK with some scepticism and querying whether they and their businesses are truly welcome here," Sosna added.

"As welcome as revisions might be for non-doms, these new rules are due to take effect from April 2025 and any changes to the incoming regime at this stage will cause further uncertainty with little time for those affected to react. To be able to plan efficiently and effectively, stability is also needed," Sean Cockburn, partner at , said: "The decision to leave the UK and to be non-resident is generally taken for one or both of two reasons: One is simply that a move to worldwide taxation on income and gains in the UK is not acceptable. There are many countries which offer lower tax rates and can incentivise entrepreneurs to relocate to them. The non-dom tax reforms only offer a four-year period during which full UK tax is not applicable and that is only for those who are moving to the UK (and generally not to those already living here); and (second) inheritance tax – there may be a positive incentive to leave the UK now in many cases to avoid a 40 per cent inheritance tax exposure applying on worldwide assets. The non-dom tax reforms have a potential IHT 'tail' of up to 10 years for those who leave the UK in the future and this may well be unacceptable to many wealthy and internationally mobile individuals. If the government wants to stop non-dom individuals leaving the UK, measures on these points would also be required."

Mauro De Santis Bo, partner at already left, it may be too late to reverse their decisions and I doubt this ‘softening’ will be enough to make them change their minds. The UK now faces a challenge in rebuilding trust among this community and demonstrating that it can balance fiscal needs with a competitive, business-friendly environment. Timing is everything, and  stronger, clearer commitment to welcoming global wealth sooner could have mitigated the damage," De Santis said.