UK: The real reason for the decline in non-doms…..and it’s not Brexit

The number of non-domiciled tax payers in the UK declined to 78,300 in the 2017/18 tax year from 90,500 in the previous year.

While this 13% decline has been attributed to Brexit and the prospect of a change in government, HMRC has told Knight Frank that the fall is instead explained by rule changes to the tax system.

Non-doms are individuals whose permanent residence is in another country but who live in the UK for tax purposes. Advantages include not having to pay tax on any worldwide income.

The rule change, which was introduced in April 2017, relates to so-called deemed domiciled status, which meant that some non-doms would have their worldwide income drawn into the UK tax net. This led to a number of them switching to a domiciled tax status.

While there were some non-doms who left the UK tax system in 2017/18, HMRC confirmed that the number of new non-doms in the same year broadly cancelled that figure out. The 13% decline, therefore, was the result of individuals becoming domiciled for tax purposes and no longer registering in the numbers.

Paddy Dring, global head of prime sales at Knight Frank, said: “The balance between UK and overseas demand for London property has not changed in recent years. While some buyers are taking advantage of the weak pound, many are also making a confident long-term bet on London.”

London had the largest non-domiciled taxpayer population in 2016/17, according to HMRC. While 58% lived in London, the city accounted for 76% of UK income tax, capital gains tax and national insurance contributions from non-doms.