A number of changes in Labour’s budget could be prompting the wealthy to leave the UK (Image: GETTY)
Changes to Inheritance Tax rules could see millions more people liable for the hefty 40% charge, but alterations to domicile status have revealed a new loophole. Many individuals may face an unexpected Inheritance Tax bill due to Rachel Reeves’ changes to exemption rules from 2027 onwards.
However, there are still some key loopholes and escapes that could help lessen the burden on future generations. One increasingly popular option is moving abroad to avoid the 40% tax bill, which wasn’t a choice previously.
Some of the changes made in Labour’s first budget to domicile statuses and rules mean Brits who retire abroad and die overseas won’t have to pay UK Inheritance Tax on their foreign assets if they’ve lived outside of the UK for at least 10 years. This is due to the replacement of the domicile and non-dom tax regime with a residency status system.
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The changes around British domicile will take effect in April 2025, with Brits abroad currently still liable for Inheritance Tax on their worldwide wealth. Many Brits who are already living abroad could fully utilise this loophole as soon as the domicile change comes into effect.
It’s also worth noting that while you may avoid British death taxes, your move abroad could make you liable for Inheritance Tax dues in your chosen country.
A select few nations, including India, Qatar, Singapore, New Zealand, Malta, and Norway, either don’t impose Inheritance Tax or have very specific conditions for its payment.
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Amidst concerns that the combination of this fact with rising private school fees could trigger a flight of affluent Brits, Maxwell Marlow from the Adam Smith Institute cautioned “The abolition of the non-dom regime will drive away highly mobile wealth creators and so their tax contribution will decrease and they will invest less in our economy.”
The Office for Budget Responsibility has anticipated some impact, predicting a 12% exodus of non-doms as a result of the policy changes, up from the 10% forecast when , the Conservative predecessor to Reeves, unveiled his strategy.
Defending the reforms, an HM Treasury spokesperson told the media outlet: “Replacing the outdated non-dom tax regime with a new internationally competitive new residence-based system addresses unfairness in our tax system, attracts the best talent and investment to the UK.”