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    ARTICLE - UK

    Spring Budget 2024: Implications for Non-Dom Real Estate Buyers

    11 Apr

    Spring Budget 2024: Implications for Non-Dom Real Estate Buyers - Introduction

    In a significant policy shift outlined in the Spring Budget 2024, Chancellor Jeremy Hunt has announced comprehensive reforms to the tax treatment of non-UK domiciled individuals (non-doms) residing in the UK. These changes, aimed at restructuring the non-dom regime, will notably impact potential purchasers of UK property. Here, we delve into the key aspects of the proposed adjustments and what they mean for buyers of UK real estate.

    Understanding Non-Doms

    Non-doms are individuals whose permanent home is not in the UK, yet who spend part of the year living in the country. Under the current system, non-doms can avoid UK tax on their foreign income and gains (FIG) by not bringing these funds into the UK, leveraging the 'remittance basis' of taxation.

    The Shift in Policy

    The UK Government plans to eliminate the non-dom regime, transitioning to a new residence-based tax system effective from 6 April 2025. Under this new regime, individuals moving to the UK after spending at least a decade abroad will enjoy a four-year period during which they are exempt from UK tax on their worldwide FIG, regardless of whether the income is brought into the UK. The transition period in 2025/26 and 2026/27 will also introduce specific reliefs. It's important to note that while the UK Inheritance Tax (IHT) exposure for non-UK assets may change under the new rules, the IHT treatment for UK residential property remains unchanged. This means all property owners, regardless of their domicile status or eligibility for the four-year exemption, will still face IHT on UK properties.

    Implications for UK Property Buyers

    For non-residents purchasing UK property, the upcoming changes will have no direct impact, provided they manage their days spent in the UK carefully to avoid becoming tax residents. Conversely, those relocating to the UK might find the new regime more favorable, as they can bring FIG into the UK without tax implications for the first four years of residence—a simplification of the current system. However, buyers planning a long-term move should consider the broader implications on their worldwide assets, as residing in the UK beyond four years subjects their global FIG to UK tax, and a ten-year stay brings their entire worldwide estate under the UK IHT regime. Investors purchasing properties for their children or for investment purposes need to consult with advisors to navigate the best funding strategies and understand their IHT exposure.

    Case Studies

    The Mayfair investor

    A Singaporean buying a property in Mayfair for rental and capital appreciation purposes will remain unaffected by the tax regime changes, given their non-resident status. However, the tax rate on gains from UK residential property sales will adjust from 28% to 24% starting 6 April 2024.

    London Pied-a-terre

    A couple from the Middle East buying a London property for short stays will need to carefully manage their time spent in the UK to avoid residency and its tax implications. Consulting with tax advisors is crucial to understanding the residency thresholds.

    American Entrepreneur

    An American buying a flat in London for his daughter presents a unique case due to the US's global taxation on citizens. The entrepreneur might face lesser impact from the UK's tax changes and should explore ways to optimize his tax position, considering the US and UK tax obligations.

    Spring Budget 2024: Implications for Non-Dom Real Estate Buyers - Conclusion

    These changes mark a pivotal moment for non-dom individuals engaged in the UK real estate market. It's imperative for potential buyers and existing non-dom property owners to seek comprehensive advice to navigate the evolving tax landscape effectively. Final thoughts If you have any queries on this article on the Spring Budget 2024: Implications for Non-Dom Real Estate Buyers, or UK tax matters more generally, then please get in touch.
    Non domReal EstateResidency

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