Prime Minister Jeremy Hunt is reportedly considering scrapping the UK’s non-domicile tax rules in next week’s Budget, a move that would uproot one of Labour’s key fiscal policies.
The decision is understood to be on a list of revenue options drawn up by the Chancellor and Rishi Sunak after economic estimates showed less money than expected for tax cuts and spending pledges.
If announced in next week’s Budget, the Conservatives will reflect Labor policies that Mr Hunt has previously criticized.
Abolishing the non-dom tax system would raise an estimated £3.6bn a year.
Treasury officials told newspapers on Wednesday that Prime Minister Hunt was looking to cut taxes as one of a variety of last-ditch options in case official forecasts worsen in the coming days, further hampering prospects for budget tax cuts. The company is reportedly considering abolishing or reducing its size. A Ministry of Finance spokesperson said, “We do not comment on budget considerations ahead of fiscal events.”
There were 68,800 non-doms in the UK in the tax year ending 2022, according to the Department of Revenue and Customs.
Under current rules, foreign nationals living in the UK can earn money from overseas capital without paying UK tax for up to 15 years, unless they repatriate the income or capital gains. This rule has been used by Mr Sunak’s wife, Akshata Murthy, to save her millions of dollars in British tax payments.
The Guardian reported last month that Labor plans to scrap non-Dom tax relief as part of options being considered that would give those eligible a four-year grace period.
Research suggesting that scrapping tax cuts could raise £3.2bn a year was cited when Labor announced its plans for 2022. Shadow Chancellor Rachel Reeves said Labor would do so if the tax cuts were scrapped completely, increasing them every year. The money will be used to expand the NHS workforce.
However, the party is also considering a new system for temporary residents. One of the options being considered for her is to allow the individual to reside in the UK as a non-resident for four years before paying full UK tax.
The Prime Minister suggested in November that it was unclear how much money would be raised by abolishing the tax status.
Mr Hunt said at the time that he wanted the ultra-wealthy to “stay here and spend their money here”, and Treasury officials said they were “very skeptical” about how much money the move would actually make. “I have concerns about this,” he added.
