‘Non-doms’ – people who live in the UK but who are not settled here permanently– currently enjoy certain tax advantages. The Labour Party has said that it intends to ‘scrap the non-dom rules, bringing in a modern scheme for people who are genuinely living in the UK for short periods’1  if it wins the upcoming general election. Recent reports suggest that the Chancellor, Jeremy Hunt, is now considering reforming the taxation of non-doms in this week’s Budget. 

There is a strong case for reform. The subjective concept of domicile is an unsatisfactory basis for taxation; it would be better to base taxation on objective, observable criteria such as years of residence. And there are undoubtedly inequities and anomalies in the current system: for example, it actively discourages wealthy non-doms from bringing their wealth into the UK. But there is also a strong case, both principled and pragmatic, for not applying all UK taxes in full as soon as people arrive in the UK. There is a range of possible reform options; careful consideration of the appropriate design of the system is needed. 

The taxation of non-doms is a complex area and has been reformed significantly in the past 20 years. Here we summarise what is known (and not known) about non-doms and the key policy issues involved with ‘scrapping’ or reforming their current tax regime.