May 2024

UK Prime Minister Rishi Sunak’s decision to call a UK General Election on 4 July will have repercussions in the UK and overseas in respect of the proposed changes to the taxation of non-doms, the proposed removal of trust protections and the consultation on the inheritance tax (IHT).

Parliament will be dissolved on the 30 May with none of the proposed changes becoming law and it will not be clear until the end of summer which version of the non-dom changes will be implemented or how far the trust and IHT changes will go.

After the election there will still be just under nine months to 5 April 2025, which may be sufficient time to finalise and implement the changes before the next tax year. Certainly, both the Conservative and Labour parties have strong incentives to get their proposals over the line.

We have been encouraging non-UK domiciled clients who have a UK connection to consider, placing their overseas assets into trust before the existing trust protections from UK IHT on their worldwide assets are lost.

We have also been encouraging long-term British expats to obtain a Counsel Opinion confirming that that they have acquired a new ‘domicile of choice’ in their current place of residence, and then to transfer as much wealth as possible into overseas trusts to ensure it is excluded from UK IHT. The same approach is generally recommended for non-UK domiciles who are not currently deemed domiciled and who plan to become UK resident for a substantial period.

The election announcement does not change this general recommendation. There is enough information about the proposed changes to start sensible planning. If this planning turns out to be unnecessary, it can be unwound. But the costs involved will be inconsequential compared to the potential IHT bill if this planning is no longer available. Now is the time to get ahead of the game before it gets more complicated.

Laurence Lancaster

Group Head of Tax