Hunt’s dramatic announcement went against his previous assertions that such a move would end up costing the UK economy £8bn.
But this was clearly a tactical political move in a general election year to take the wind out of Labour’s sails.
What has actually happened?
From April 6 2025, the archaic concept of domicile will no longer be relevant for determining an individual’s tax status.
Instead, individuals, who have not lived in the UK for the last 10 years, moving to the UK will have a four-year tax holiday and they can freely bring their overseas monies to the UK.
This new regime will be much simpler but more limited in time as non-doms currently benefit from a 15-year period where they do not pay tax on their overseas sources.
Once the individual has been UK resident for more than four years, they will pay tax on their worldwide income and gains.
Non-doms who are already here will be left feeling aggrieved, but transitional rules will allow non-doms to remit overseas monies at a generous 12 per cent flat rate tax over a two-year window (2025-26 and 2026-27).
In addition, non-doms who will lose access to the remittance basis from April 6 2025 will benefit from a 50 per cent reduction in their personal foreign income subject to UK tax in 2025-26.
And finally, non-doms who have previously claimed the remittance basis will be able to rebase their overseas assets to value at April 5 2019, such that for disposals after April 6 2025, only the increase in value from 2019 will be subject to UK CGT.
Clearly, these transitional measures have been introduced to sweeten the pill for current non-doms and to avoid a mass overnight exodus.
The rules on non-UK trusts are also radically reformed, as the present income tax and CGT protections afforded to such structures will be completely removed; however, the inheritance tax benefits of structures established before April 6 2025 are confirmed to be retained.
Specifically on the topic of IHT, the government ran out of time before the Spring Budget announcement to construct the new rules, and a consultation will be launched in due course to invite stakeholders to provide their input on how IHT should be best managed.
The headline 40 per cent IHT rate is a severe disincentive for individuals to move to the UK and this requires careful consideration.
The initial indication from the government is that after 10 years of UK residence an individual will be subject to IHT on worldwide assets.
Without question, the government’s proposed reforms are a significant simplification and modernise a desperately outdated regime.
However, there will be a concern from some that the government has gone too far by only having a four-year regime and losing its competitive edge compared with countries such as Italy, who have 10-year tax holidays.
