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In brief

On 6 March 2024, the current government (led by the Conservative Party) announced a number of significant changes to the way in which UK tax resident non-UK domiciled (RND) individuals will be taxed in future. These changes are expected to take effect from 6 April 2025. 

For further details see our previous alert

Following the announcement from the Conservative government, the UK Labour Party (currently in opposition) have announced that, if elected, they would implement further reforms to those proposed by the current government.

In this alert we provide a recap of the reforms announced by the current Conservative government, and an overview of the further changes that Labour have said they will introduce if elected. 


  1. In more detail
  2. Recap on historic propostions and current government proposals
  3. Further possible reforms announced by Labour
  4. Conclusion

It is worth noting that the UK must hold an election before January 2025, and many commentators are suggesting that this will be held in Autumn 2024. Labour currently have a significant lead of over 20 points in all reputable polls, and are widely expected to form the next government after the election. It is therefore likely that their proposed modifications to the reforms (set out below) will be enacted.

In more detail

Recap on historic propostions and current government proposals

Historic rules

Historically, those who are UK tax resident, but who are not considered domiciled in the UK (e.g., because they were born outside the UK and/or to foreign parents) have been able to elect to be taxed on the remittance basis of UK taxation.

This meant that such RND individuals were only liable to UK income and capital gains tax on their UK source income and capital gains, and not their foreign income and gains (FIG), unless such FIG were “remitted” to the UK. 

RND individuals were also able to benefit from the use of trusts as a means of protecting against UK inheritance tax (IHT) should they become “deemed domiciled” if resident in the UK for 15 out of 20 UK tax years. 

Conservative government proposed reforms 

In its annual Budget, the current Conservative government announced reform to the rules. These included replacing the remittance basis of taxation with a new four-year FIG regime. 

This proposed regime will be available to individuals for the first four tax years of UK tax residence, after a period of ten years of non-UK tax residence.

The government had announced that eligible individuals will not pay tax on FIG arising in the first four years of UK tax residence, and will be able to remit these funds to the UK free from any additional tax charges.

For those individuals previously taxed on the remittance basis but not eligible for the new four-year FIG regime, such individuals will be subject to UK income and capital gains tax on their worldwide FIG. However, the current government had announced a concession for those not eligible for the four-year FIG regime and moving from the remittance basis, such that only 50% of their non-UK income arising in the 2025/26 tax year will be subject to UK tax.

In addition, the government had announced concessions to the way in which trusts set up prior to 6 April 2025 would be taxed. 

Under ordinary IHT rules, trusts are subject to a number of charges. These include an “entry charge” (of up to 20%) upon property being settled into a trust, an “anniversary charge” (of up to 6%) on each ten-year anniversary of the trust being settled, and an “exit charge” (of up to 6%) when property leaves the trust. 

However, where non-UK assets are settled into a trust by someone who was not UK domiciled (or deemed domiciled) at the time the assets were settled, such assets fell outside the scope of the above IHT charges. 

These trusts are currently referred to as “excluded property trusts” and provided an effective way for non-UK domiciled individuals to move assets outside of their taxable estate prior to becoming deemed domiciled after 15 years of UK tax residence. 

Under the proposed new rules announced by the Conservatives, the above position was not expected to change, and assets settled into a trust prior to 6 April 2025 were expected to remain outside the scope of the IHT charges. This presented a possible planning opportunity to set up “excluded property settlements” prior to 6 April 2025.

Further possible reforms announced by Labour

The opposition Labour Party had previously announced its intention to “abolish” the RND rules if elected, and the budget announcement by the Conservative government was arguably an attempt by the Conservative Party to take control of the changes before the upcoming election.

In response to the government’s proposed reforms, Labour have announced that, if elected to government, they would make two important modifications to those proposed by the government. 

No 50% concession for 2025/26

Labour would not include the current proposal to allow those switching from the remittance basis to be taxed at 50% on their FIG for tax year 2025/26. 

Under Labour, an individual previously taxed on the remittance basis who does not qualify for the new FIG regime would be taxed on their total worldwide FIG from April 2025, and would not have the benefit of any 50% concession.  

No protection for pre-April 2025 trusts from IHT charges  

Arguably of more significance, Labour have said that they would not include any protection from IHT charges for trusts set up prior to 6 April 2025.

This represents a significant departure from the current Conservative government proposals, which effectively protect trusts settled before the rules come into effect from punitive IHT charges, and allow for a possible planning opportunity to set up trusts prior to 6 April 2025 as a means to move assets outside the taxable estate of a UK resident who will become subject to IHT under the new rules. 

Under Labour’s proposals, any trusts in existence (whether settled before or after 6 April 2025) will be within scope of the IHT trust charges, which include a 6% ten-yearly anniversary charge on the value of trust assets, and an exit charge of up to 6% on the value of any assets leaving the trust. 

The overall impact of Labour’s proposals will be that many UK-based individuals who had set up trusts with non-UK assets in previous years will now find these are subject to significant UK tax charges, with the associated reporting required to HMRC.  

It will be a fact specific, case-by-case analysis, as to whether such trusts should be unwound prior to 6 April 2025 and we would urge clients and trustees impacted by these changes to take urgent advice to consider restructuring options.


The government have stated that their proposed reforms will raise an additional GBP 2.7 billion per year in tax by 2028/29. Labour have claimed that their further modifications would raise an additional GBP 2.6 billion per year, however it is not clear how they calculate this figure. It remains to be seen if either of these figures are accurate as neither appear to take into account the possibility that people will exit the UK as a result of the changes. 

The current proposed IHT changes announced by the government are subject to a consultation. The government may then put forward legislation later in the year to enact their proposals. 

If, as expected, Labour are elected in late 2024, it seems likely they may bring in further legislation before the changes come into effect from 6 April 2025. 

The impact of such additional reforms will further limit the current tax advantages that exist for those considered non-UK domiciled, and the working assumption should be that, under a Labour government, trusts set up prior to 6 April 2025 will be within scope to the various IHT charges. 

It is therefore essential that individuals, family offices and trustees affected by either the existing government proposals, or those put forward by Labour, take urgent advice on their impact in order to ascertain what restructuring options may be appropriate.  


Ashley Crossley is head of the Wealth Management Department in the London office. He has been chair of the Firm’s Europe and Middle East Wealth Management Practice Group as well as serving as a member of Baker McKenzie’s Global Wealth Management Steering Committee and coordinating partner for the Firm’s global banking relationships. He also heads the Firm's Middle East practice. He is recognized as a leader in his area of practice by Legal 500, Citywealth and Chambers Global. Ashley frequently speaks at external conferences and seminars, and is the editor of STEP's Russia/CIS directory. Ashley is qualified as a barrister and solicitor.


Phyllis Townsend is Partner in the Wealth Management practice in London, Chair of the EMEA Wealth Management Steering Committee and a member of the Firm's Global Wealth Management Steering Committee. Phyllis works with clients on a broad range of wealth management matters, including those with a particular focus on investment structuring. Phyllis is listed in Chambers HNW Guide, Legal 500 and Legal Week's "Private Client Global Elite - Ones to Watch". Phyllis is a member of the Founding Committee of Thought Leaders 4 Private Client Next Gen Wealth. Phyllis joined in 2012 from Rothschild Wealth Management & Trust where she was legal counsel in London and Zurich.


Christopher Cook is a senior associate and solicitor advocate in Baker McKenzie's Global Wealth Management practice. He works closely with financial institutions, ultra-high-net worth individuals and leading entrepreneurial families on a broad range of wealth management matters. Christopher has been awarded CityWealth Lawyer of the Year IFC Category. Christopher has been listed in Private Client Practitioner "Top 35 Under 35" and spoken at numerous conferences including in London, Zurich, Geneva and Monaco.


Oliver Stephens is an Associate in Baker Mckenzie, London office.


Alfie is a tax advisor in Baker McKenzie's Wealth Management Practice in London. He trained and qualified at PricewaterhouseCoopers LLP before leaving as a senior manager to join Baker McKenzie in 2022.


Pippa Goodfellow is an associate in Baker McKenzie's Global Wealth Management practice. Pippa works closely with ultra-high-net worth individuals, leading entrepreneurial families and financial institutions on a broad range of wealth management matters. Pippa advises on a range of private client issues, including UK taxation, asset protection, trusts and succession planning. The majority of her work has an international element and involves cross-border issues.
Pippa has written for leading publications, including the Tax Journal and Private Client Business and has spoken at conferences in London and Luxembourg. She trained and worked at a leading city firm for five years before joining Baker McKenzie in November 2022.

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