advisers to the rich react to UK Budget’s non-dom tax cap

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Advisers to the rich have rejected a Budget measure to limit the tax payable by former non-doms as “too little, too late”.

In her Budget this week, chancellor Rachel Reeves included a measure to cap an unlimited inheritance tax (IHT) charge she introduced last year. It was one reason cited by wealthy people for leaving the UK.

The IHT charge is currently 6 per cent every 10 years on certain assets in worldwide trusts, but the new measure will limit it to £5mn for trusts established before last year’s Budget.

A government official said increased revenue from anti-avoidance measures on the rich meant it could spend “a little bit to cap IHT charges on trusts, which is the thing [former non-doms] have been complaining about most”.

The move was “an attempt to lure back former non-doms who have left the UK over concern about the inheritance tax”, said Robert Brodrick, partner at law firm Payne Hicks Beach, adding: “Unfortunately, this is probably too little, too late.”

He estimated it would only benefit those whose trusts were valued at more than about £85mn.

One former non-dom who left in part because of the new trust charge said that “the damage is done”.

Giuseppe Ciucci, executive chair of Stonehage Fleming, which advises the wealthy, said the measure was welcome but “may not go far enough” for some people. “The inheritance tax aspect . . . is something which for many is a red line vis-à-vis their UK tax residence,” he added.

Damian Bloom, a partner at law firm Taylor Wessing, also said it would be “too little, too late”.

In her first Budget, Reeves confirmed the abolition of the non-dom regime, which allowed British residents who declared their permanent home as being overseas to avoid paying UK tax on foreign income and gains.

The Office for Budget Responsibility said the new measures taken together “leave the estimated revenue” from non-dom reforms “broadly unchanged”. It added that revenue predictions were “highly uncertain and contingent on the behaviour of a small number of wealthy individuals”.

The number of non-doms who left the UK over the 2024 autumn Budget’s measures is disputed.

The FT reported in August that HM Revenue & Customs payroll data found no evidence to suggest more non-doms with trusts had left than official predictions of 25 per cent.

However, advisers to the wealthiest non-domiciled individuals reported significant departures. HMRC figures were based on Pay As You Earn (PAYE) payroll data, which does not capture the very richest individuals.

Current and former non-doms’ tax contributions in the UK rose 1.8 per cent to £12.5bn in 2023-24.

A Treasury spokesperson said: “The targeted cap will help to ensure that we collect revenue to cut the cost of living, cut waiting lists and cut debt and borrowing, whilst striking a balance to ensure that the UK remains a competitive destination for globally mobile talent.”