Spring Budget: All is not lost for non-dom clients

In a dramatic reversal of his recent criticism of the Labour Party for the same idea, we've heard this week how Jeremy Hunt may look to overhaul the UK’s tax regime for resident non-domiciliaries, to help fund tax cuts elsewhere.

This is surprising to hear from a Conservative chancellor. The only clear conclusion that can be drawn this week is that the UK’s non-dom regime, in its current form, is surely over, regardless of the outcome of the next general election. What's less clear is what, if anything, will replace it and whether these changes will be subject to a period of consultation. Whether simply scaling back the number of years a person can be resident before they're considered to deemed domiciled (as proposed by Labour), or a lump sum tax regime to mirror some other European countries, there are many important policy and legislative questions to address. An abolition with no replacement would have far reaching economic implications.

This is not all gloomy for international people looking to live and invest in the UK, though. One outcome of a re-invigorated push to overhaul this (notoriously labyrinthine) part of our tax code might to remove the uncertainty taxpayers face in HMRC’s interpretation of its own overly complex laws. The current rules actively discourage non dom taxpayers from bringing wealth into the UK, so there's hope that opportunities will be taken to take the sting out of the wider impact to the economy of the non-dom regime evaporating.

Non-doms should also know that many planning opportunities will still be available to them (for both tax and family/asset protection reasons). Mills & Reeve is a market leader in both onshore and offshore Family Investment Companies, tried and tested structures we've created for countless clients to help with inheritance tax and passing wealth to younger generations in a sensible and controlled way. Family Investment Companies work extremely well even where a taxpayer does not benefit from the existing non-dom regime, and we believe this planning will be increasingly deployed by internationally mobile families with connections to the UK. Profits can be accumulated within the Family Investment Company with directors having discretion as to which shareholders benefit from dividends and when. Funds can also be loaned into the structure, assigned amongst family members with interest rolled up to give additional flexibility as to how individuals can benefit. 

Please get in touch to discuss if a Family Investment Company is the right option for you or your clients. 

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Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.

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