UK ministers are expected to drop a provision in last year’s Finance Bill which would have required non-domiciled UK residents to pay taxes on money they held in non-UK bank accounts.

The measure was part of the UK’s new non-dom tax regime introduced last October, and was meant to “replace the remittance basis of taxation, which is based on domicile status, with a new tax regime based on residence from 6 April 2025.”

In the past, the ‘remittance basis’ rule meant that foreign individuals were exempt from paying tax in the UK on assets and gains which were earned and kept offshore. But chancellor Rachel Reeves introduced proposals last year to get rid of the ‘remittance basis’ arrangement, exposing foreigners to new taxes on their wealth abroad.

But the measure was criticised by legal experts who said it was wrong for UK authorities to tax money that has been kept anywhere in the world, and warned of unintended consequences.

The Chartered Institute of Taxation has also warned HMRC about the change, arguing that “there should not be such different and complicated rules introduced at this late stage to determine what is a taxable remittance,” the FT has reported.

Fair taxation

When the proposal was initially announced last October, the government said at the time it was “committed to addressing unfairness in the tax system, so that everyone who is long-term resident in the UK pays their taxes here.”

“The government will therefore remove the outdated concept of domicile status from the tax system and implement a new residence-based regime which is internationally competitive and focused on attracting the best talent and investment to the UK,” a policy paper read.

But since then, ministers have been watering down and making changes to the initial plan in order to prevent a exodus from the UK of wealthy foreigners and investors.

Last June a headline in Fortune suggested that the super-rich in the UK were “in panic-mode and fleeing the country to shelter their money.” A separate group of experts also argued that “higher tax rates, beyond a certain point, reduce rather than raise revenues.”

Foreign investors and wealthy individuals were now concerned about the political, legal and financial stability the UK had offered them for decades.

It seems like the government got the message. A Treasury official was quoted by the FT saying: “We are committed to engaging with stakeholders to ensure the non-doms reforms work as well as possible. As is usual we are considering any technical comments on the legislation as part of this process.”

Also last month, chancellor Rachel Reeves said at the World Economic Forum in Davos “that the government would soon table an amendment to its own finance bill,” the FT reported.