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Chancellor Rachel Reeves is exploring reversing a choice to cost UK inheritance tax on the worldwide belongings of non-doms, following a spate of exits and lobbying by the Metropolis of London, in response to authorities officers and financiers briefed on the discussions.
The publicity of worldwide belongings to inheritance tax at 40 per cent — which got here into pressure in April — is the factor of scrapping the non-dom regime that’s “inflicting most heartburn”, one authorities official mentioned. The Treasury is reviewing the choice, they added.
One other official confirmed the Treasury would change the inheritance tax regime for non-doms if it was discovered to be good for Britain’s worldwide competitiveness.
One senior financier who’s in frequent contact with Reeves mentioned the federal government is looking for a approach of “backtracking with out backtracking” on the non-dom modifications — with a selected deal with the inheritance tax situation.
A second senior Metropolis determine mentioned that “there’ll almost definitely be some tweaks to inheritance tax to cease the non-dom exodus”.
The ending of the non-dom regime — and the Labour authorities’s choice to shut a loophole permitting using offshore trusts to keep away from inheritance tax — has triggered a wave of rich folks to depart the UK for extra tax-friendly regimes such because the United Arab Emirates, Italy and Switzerland.
Metal billionaire Lakshmi Mittal and Nassef Sawiris, Egypt’s richest man, are amongst these to have both left the UK or who’re planning to due to the abolition of the non-dom regime.
The Treasury mentioned: “The federal government will proceed to work with stakeholders to make sure the brand new regime is internationally aggressive and continues to deal with attracting one of the best expertise and funding to the UK.”
The abolition of the non-dom regime — first introduced by the earlier Conservative authorities — was confirmed by Reeves in her October Price range, when she additionally introduced the closure of the trusts “loophole”.
The chancellor is claimed by allies to be “listening” to representations from the Metropolis on the difficulty. “We aren’t complacent,” mentioned one. “We wish to ensure that Britain is a pretty place to be. We’re getting a whole lot of suggestions.”
A few of that suggestions is being handed on by Varun Chandra, the Quantity 10 enterprise adviser, and Jonathan Reynolds, enterprise secretary, each of whom recurrently have their ears bent on the difficulty by worldwide traders.
Alastair King, the Lord Mayor of the Metropolis of London, is amongst these making the case for modifications to the Treasury after elevating issues concerning the risk to the Metropolis from a mix of the abolition of the non-dom regime, modifications to inheritance tax, and the elimination of VAT exemption on non-public faculty charges.
One dealer mentioned that collectively the modifications had triggered ache for “a lot of folks within the Metropolis, not simply billionaires”.
Nevertheless, any retreat on the non-dom regime can be problematic for Reeves, coming after a U-turn over plans to strip winter gasoline funds from 10mn pensioners. She can be within the means of slicing £5bn of illness and incapacity advantages.
Any change within the regime would usually come within the Price range that’s anticipated within the autumn.
But some in authorities consider Reeves is not going to give floor on the difficulty. “We received’t do it, the politics are dreadful,” mentioned one Labour adviser. One other senior Labour official mentioned the crackdown on non-doms was “one among our hottest insurance policies”.
In opposition, had initially estimated that ending the tax break on trusts would usher in £430mn a 12 months. Nevertheless, the Workplace for Price range Accountability in October estimated the measure will usher in simply £200mn a 12 months in 2029-30.
Advisers mentioned that Reeves’ shock transfer to reform agricultural property aid and enterprise property aid in final 12 months’s Price range was additionally prompting the departure of British enterprise homeowners.
The change implies that these with massive estates or vital firms that had been beforehand exempt pays inheritance tax at 20 per cent on belongings above £1mn from April 2026.
Ceri Vokes, co-head of the non-public consumer and tax crew in Europe at regulation agency Withers, mentioned modifications to enterprise property aid must be reversed to forestall a “additional exodus of enterprise homeowners from the UK”.
She added: “By forcing folks to depart the UK, you don’t get 20 per cent of the worth of their enterprise, you get 0 per cent.”
Further reporting by Josh Spero, Emma Agyemang and Ashley Armstrong