Who is leaving? Tax changes and family law

may 7, 2025

POSTED BY: WILLIAM HEALING

For French translation click here

On 5 April this year a once in a generation tax deadline arrived.

With orderly haste I finished cases with £170million worth of divorce assets to beat that deadline.

Family lawyers with wealthy foreign clients rushed to close deals to benefit from special rules available to divorcing non domiciled individuals who were resident in the UK. There were considerable tax advantages available to them which closed on 5 April.

The two-hundred-year-old tax status came to an end for resident non-domiciled individuals. This has allowed those registered individuals to shelter foreign income and gains from UK tax. Domicile is an old English legal concept of a person’s connecting country at birth and usually but not always kept for life.

The remittance basis of tax (which means offshore income and gains are not taxed) was introduced at the end of the 18th century under George III, and was even available to British individuals until the start of World War I. The criteria were not to be domiciled here and not to remit wealth here. Such assets were not taxed.

The regime was kept up for foreign non-domiciled individuals in recent decades because it was felt useful to welcome wealthy individuals and families to base themselves in the UK. The UK was in a competitive space with other countries offering tax advantages either relating to investment or property purchase or for a fixed initial period of residence. France, Italy and Portugal for example all have various schemes which are popular to attract the globally wealthy.

The political environment has changed and it was felt the regime had to come to an end in the UK.

So, what have divorce lawyers like me been reminded of? First, always plan for tax especially in an international context. It’s not an afterthought and well thought through strategies can save clients very large sums.

Second, the UK is an extremely attractive place to live with its cultural richness, tolerance, education facilities, and so on. However, we live in a world where high net worth individuals can and do move to tax competitive places. The government has kept, as I expected it would, a short term residence regime to continue to attract wealthy families here. It’s called the Foreign Income and Gains scheme.  Those income and gains can be brought onshore tax free for the first four years of a foreigner’s residence here.

Last of all, take with a pinch of salt the studies about the many uber rich fleeing the country. I think the studies about millionaires fleeing the country are a little overdone. Immigration control in the UK does not record who leaves, let alone ask people how wealthy they are when they do.  The studies about millionaires fleeing are usually from consultancies who make fees from advising families on the move.

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