What does the pledge mean? 

‘Non-dom’ tax status was part of the rules around the tax UK residents were required to  pay on foreign income if their permanent home or “domicile” (for tax purposes) was outside the UK. 

Under the previous rules, a non-dom could choose to pay tax on their foreign income or could choose to claim the ‘remittance basis’, meaning they did not have to pay tax on foreign income or capital gains unless it was brought to the UK (for example if it was paid into a UK bank account). Non-doms were still required to pay tax as usual on UK income and assets.

HMRC estimated that in 2021/22 approximately 68,900 people claimed non-dom status in the UK, of whom 37,800 paid tax on the remittance basis, which could only be claimed for a maximum of 15 years.

Labour’s manifesto pledged to “abolish non-dom status once and for all, replacing it with a modern scheme for people genuinely in the country for a short period”.

The party did not set out a timeframe for this commitment in its manifesto, and did not specify exactly what changes would be made to the tax system for people who had  claimed non-dom status.

It’s worth noting that the previous government had already announced plans to replace the existing tax rules for non-doms ahead of the election, but these changes were not due to come into force until 6 April 2025.

What progress has been made?

The non-dom tax status was abolished on 6 April 2025 when new rules set out in the Finance Act 2025 came into effect. 

This change was announced by Chancellor of the Exchequer Rachel Reeves in the Autumn Budget in October 2024, with legislation subsequently introduced to the Commons in November 2024. This legislation received Royal Assent on 20 March 2025.

The new rules introduced a new tax regime based on residence. This means that all longer-term UK residents will be taxed by the UK on their worldwide income and gains as they arise, rather than, as had been the case for some non-doms previously under the remittance scheme, when the income and gains were brought into the UK.

For new arrivals to the UK, the rules provide 100% relief on eligible foreign income and gains in their first four years of tax residence, provided they have not been a UK tax resident in the ten tax years immediately prior to their arrival.

Changes were also made to the Temporary Repatriation Facility, introducing a three-year scheme allowing people impacted by abolition of non-dom tax status to bring their assets to the UK at a discounted tax rate.

The previous domicile-based system of Inheritance Tax was also replaced with a new residence-based system.