Jeremy Hunt has abolished the non-domiciled tax status for thousands of wealthy foreign residents in the UK.
The chancellor made the announcement today as he delivered his last budget before the General Election.
Hunt said scrapping the tax regime will make the system “fairer and competitive”.
“The government will abolish the current tax system for non-doms, get rid of the outdated concept of domicile and the remittance basis in the tax system, and replace it with a modern, simpler and fairer residency-based system.”
Hunt said the change, which comes into force in April 2025, will raise around £2.7bn a year going forward.
He said there will be a non-dom-style tax status open to people coming to the UK for four years. But after that they will have to pay UK taxes.
The chancellor also said there will be a two year period where non-doms would be “encouraged to bring wealth earned overseas to the UK where it can be spent and invested here”.
He claimed this measure will generate more than £1bn of tax and “an additional £15bn of foreign income”.
Non-doms are British residents who are not domiciled in the UK for tax purposes. It is estimated that about 70,000 people in the UK fall into this category.
The tax regime became a point of political controversy in 2022 after it emerged the Prime Minister Rishi Sunak’s wife, Akshata Murty, was a non-dom for tax purposes. Following the uproar, Murty has since agreed to pay UK tax on her overseas earnings.
Defenders of the non-dom regime say it attracts wealthy entrepreneurs, who create companies and jobs.
The Institute for Fiscal Studies (IFS) said abolishing the regime, which allows those classed as non-domiciled to live in the UK for 15 years without paying tax on assets held abroad, would make the UK a less attractive location.
However, a research by Warwick University and the London School of Economics suggests that the government could generate £3.6bn if its scrap the regime.
Labour, which has the scrapping the non-dom rule as flagship policy, has pledged to end the exemption if it wins power.
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