Labour are set to amend changes to non-dom tax rules, the Chancellor has revealed, after a large exodus of millionaires over the past year.
Asked about the news of 10,800 millionaires leaving the UK in 2024, Rachel Reeves said that the government would make an amendment to their upcoming Finance Bill.
The Chancellor said that Labour would make it easier for non-doms to move money to the UK, by increasing the temporary repatriation facility.
This allows non-doms – people who live in Britain but don’t pay UK tax on money made abroad – to bring money into the UK without paying significant taxes on it.
Labour had earlier promised to get rid of non-dom status in their election manifesto, so this change represents a softening in their plans.
Ms Reeves said she would be making the changes to the plans after “listening to the concerns” non-doms had raised.
It comes after analysts said the additional taxes had prompted an exodus of millionaires.
The Chancellor said taxes on non-doms were increased to raise funds for public services, in an interview with the Wall Street Journal.
“But we have been listening to the concerns that have been raised by the non-dom community,” Ms Reeves said.
“And in the finance bill, we will be tabling an amendment which makes more generous the temporary repatriation facility, which enables non-doms to bring money into the UK without paying significant taxes.”
Speaking at the World Economic Forum in Davos, Ms Reeves said: “We welcome people coming to the UK and we’ll have a specific kind of tax treatment that they would expect.
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“There’s been some concerns from countries that have double taxation conventions with the UK, including India, that they would be drawn into paying inheritance tax.
“That’s not the case: we are not going to change those double-taxation conventions.”
Downing Street said the move does not “change the overall approach” to the Government’s policy.
The Tories said it showed that Labour’s Budget was “falling apart in front of our eyes”.
Some tax experts said the change still did not go far enough.
Rachel De Souza, tax partner at accounting firm RSM UK, said “Whilst an increase to the temporary repatriation facility must be a good move, it is woefully inadequate to prevent wealthy non-dom and British entrepreneurs from leaving the UK.
“The way to stem this exodus would be to maintain the exemption from IHT to offshore trusts but also reverse the proposed changes to agricultural and business property relief which impacts the farmers and entrepreneurs.”
No 10 said the Finance Bill would bring forward the final policy but that the amendment “doesn’t change the overall approach, which is that we are replacing this outdated regime”.
“It doesn’t change our approach to replacing the outdated non-dom tax regime with a new internationally competitive resident-based system that addresses unfairness in our tax system, attracts the best talent and investment to the UK and ensures that everyone who is a long-term resident of the UK pays their tax here,” the Prime Minister’s official spokesman said.
He was asked why the government was listening to wealthy non-doms but not farmers, who have pushed back against changes to inheritance rules introduced in the budget.
“We always engage with farmers,” he said. “We are listening to farmers, as the Secretary of State has done and continues to do so and the Prime Minister has obviously engaged with the sector as well,” he said.
The proposed change to the Finance Bill would increase the Temporary Repatriation Facility, a three-year window where non-doms can pay a discounted rate on foreign income and gains.
A Treasury spokesperson said: “While we do not expect these changes to impact the £33.8 billion of tax revenue that the OBR forecast to raise over five years, they reflect our continued engagement with stakeholders to make sure the reforms announced at Budget operate as intended.
“The Temporary Repatriation Facility is designed to encourage non-doms to bring their funds to the UK, encouraging them to spend and invest this money here.”
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Tax rises were among the reasons Britain lost a net 10,800 millionaires in 2024, more than double the 4,200 that in 2023, according to the New World Wealth (NWW) global analytics firm.
Shadow chancellor Mel Stride said Labour had been forced to admit its plans made the UK less attractive.
“Labour’s Budget is falling apart in front of our eyes. At the election Labour said their plans would raise money, now they have been forced to admit their plans make the UK less attractive.
“But the damage is already done, tax revenue equivalent to hundreds of thousands of taxpayers has already been lost.
“Labour simply does not understand business and the economy, and working people are paying the price. It is obvious that this Chancellor is deeply out of her depth.
“She is losing control of the public finances and pressure is now building for yet more tax rises or spending cuts.
“She needs to come back to the UK and get our finances on a sustainable footing.”
