Budget 25 Implications for Non-Doms and Resident Foreigners

Whilst the 2025 Budget may feel like a long time ago, there were a number of measures contained within it that affect non-doms and resident foreigners and about which you need to be aware.

Cap for excluded property in trusts

The government has retrospectively put in place a cap of £5 million for IHT charges on excluded property held in trust as at 30 October 2024. This cap applies to settled property which was excluded property situated outside the UK at the time of the relevant charge. The £5 million cap applies to each ten-year cycle, with exit charges capped at a maximum of £125,000 per complete quarter.  This technical change will be backdated to 6 April 2025.

Non-resident Capital Gains Tax

By way of background, non-UK tax residents have been subject to UK CGT on the disposal of UK land and property since April 2015. The rules currently affect the direct disposal of interests in UK land and property, and the disposal of “property-rich entities” which are entities that derive 75% or more of their value from UK land and property, where the shareholder owns at least 25% of the equity interest.

The existing definition of property-rich entities is to change with immediate effect for Protected Cell Companies (“PCC”), such that going forward, each cell of a PCC will need to be considered separately. This will align the tax treatment for clients who have invested in UK properties through PCCs, rather than personally or via a more traditional corporate entity.

Abolition of notional dividend tax credit for non-UK residents

The government have announced that they will align the position for tax credits on dividends paid to non-residents with that of UK residents. Going forward, non-residents who choose for their UK dividend income to be assessed to UK tax (rather than being disregarded), will no longer be entitled to a 20% credit against the UK tax payable on the dividend.  

Non-residents will, however, still be able to “disregard” their dividend income from being assessed to UK tax (albeit with the loss of their personal allowance being available to reduce their remaining taxable income).

Post-departure income

The Temporary Non-Residence Rules (“TNR”) are anti-avoidance rules designed to catch certain individuals who receive specific types of income or gains, often from close companies, during a period of temporary non-residence, on their return to the UK.

It has been announced that these rules will now also apply to distributions or dividends made from ‘post-departure profits’, namely for those that have accrued in the company after the individual has left the UK.  There will also be revisions to the legislation to specifically allow relief for foreign tax paid in the country of residence at the time the dividend was paid.

Enveloped agricultural property

The existing ‘look-through’ provisions which ensure that UK residential property that is held by non-UK companies is subject to UK Inheritance Tax, will be extended to include ‘enveloped’ UK agricultural property.

Temporary Repatriation Facility (TRF)

Technical changes have been announced to the TRF which applies to former non-doms. 

Alignment of PAYE system for Overseas Workday Relief 

From 6 April 2026, the PAYE system will be aligned with the OWR limit such that the PAYE relief provided in-year will not be able to exceed more than 30% of the individual’s total employment income (the maximum on which OWR can be claimed).

Update to Annual Tax on Enveloped Dwellings (ATED)

The ATED legislation will be updated to reflect that claims to relief made in an ATED return can be made without a time limit.  Relief is available to companies holding property for qualifying commercial purposes. Penalties will continue to apply to ATED returns not delivered by the filing deadline

Voluntary National Insurance Contributions (NICs) restrictions

 It was announced that from 6 April 2026, the Government will limit the ability for individuals abroad to pay voluntary NICs at a cheaper rate to build their state pension. They also plan to increase the initial residence or contributions period to pay voluntary NICs to ten years.

Next steps

As always, these articles provide an overview of the various measures available, and no action should be taken without seeking professional advice.  At Ritchie Phillips, we pride ourselves on providing clear, pragmatic advice to help businesses, individuals and families. If you’d like to discuss any of the above, please get in touch.   

You can find more of our Budget 2025 Insights here: 

 https://www.ritchiephillips.co.uk/insights/how-did-the-budget-affect-you-your-finances