Number of UK Residents Claiming the Special Tax Status Has Plunged by Nearly 60,000 Since 2015
What is UK Non-Dom Status
UK non-dom status is a special tax status, unique to the UK and The Republic of Ireland. If your normal residence is in another country, which you plan to return to in the future you are entitled to UK non-dom status. There are serious advantages to having non-dom status in the UK. In the UK wealthy individuals can be taxed at rates of up to 45% on worldwide income. With non-dom status they pay tax only on the money that they remit to the UK. If a foreigner has dividends of say $1m per year and he keeps that money outside the UK he won’t be taxed on it.
This made the UK a haven for the wealthy in recent years. London and the South East of the country have benefitted from this as super rich residents arrive, spend money and start businesses in the local economy.
Why Have the Numbers Declined so Quickly?
The number of residents with UK non-dom status has almost halved between 2015 and 2021. From a peak of 123,000 it has declined to 68,000.
There are several reasons for this. The main one is that political pressure has caused the British government to make the rules ever more complex. Now you can only benefit from non-dom status for the first seven years of residence in the UK. After that you must either pay full UK tax or opt for a special regime where you pay a fixed fee of between £30,000 and £60,000 per year, depending on how long you’ve been resident in the UK for.
Some other reasons have likely put off potential non-doms such as Brexit and making investor visas more difficult to obtain.
There are also many other options for the wealthy. Other countries like Singapore and Monaco are competing for their business and offer better deals. Money will always flow to the places where it’s best appreciated.
Where are Former UK Residents Going?
Former UK non-dom status residents have dozens of choices of where to go. Ireland doesn’t have the same non-dom restrictions that the UK has. It also has a lower corporate tax regime which has attracted muti-nationals from around the world to the emerald isle.
Old favourites like The Cayman Islands, Monaco and Singapore will always attract the wealthy. In addition up and coming havens such as the United Arab Emirates have proved more attractive than the UK in recent years.
Is Non-Dom Status Still Worth it?
The UK can still be a decent place to live. For those who want to be active and start businesses it’s a good choice. The cultural attractions of large UK cities like London are much more interesting than what’s on offer in more traditional tax havens. So, yes for some it’s still worth it.
For those with high incomes who are able to take advantage of non-dom status it’s still a good deal. For someone earning $1m per year, they’d get the first 7 years tax free. After 7 years they’d pay $30,000 per year. Then after 12 years they’d have to pay $60,000 per year. Theoretically you could earn $15m over 15 years and have a total tax liability of less than $500,000 over 15 years. That’s a tax rate of around 3%. There’s no doubt many people will still be attracted to that.
Can British Citizens get Non-Dom Status?
The rules are complex in this area. It’s possible for someone to acquire British citizenship and retain their UK non-dom status. It’s more tricky if you were born a British citizen. If your parents or grandparents were immigrants to Britain it might be possible. British citizens looking for non-dom status are best to look to The Republic of Ireland or find a tax haven elsewhere.
Although UK non-dom status has declined dramatically in recent years, it’s still worthwhile for some people. For active entrepreneurs seeking to take advantage of the well developed financial system in the UK and for those who prefer to stay in busy cities, rather than a quiet beach there’s no doubt it’s worth considering.