New inheritance tax-break for non-doms

A new tax dodge for non-doms from last week's Budget: shadow cabinet minister Lord Wood of Anfield has revealed that George Osborne has hiked inheritance tax exemption for non-doms.

Though the exact figure hasn't been agreed, it's likely a UK taxpayer will be able to transfer more of their inheritance tax allowance - the threshold is set at £55,000 - if a spouse is not living in the UK.


The change, the Guardian reports, takes place on page 63 of the red book from Osborne's Budget. "The government intends to increase the IHT-exempt amount that a UK-domiciled individual can transfer to their non-UK domiciled spouse or civil partner."

It adds: "The government similarly intends to allow individuals who are domiciled outside the UK and who have a UK-domiciled spouse or civil partner to elect to be treated as domiciled in the UK for the purposes of IHT. These proposals will be subject to a technical consultation."

However, this tax break may be taken up by fewer people than last year. The number of non-doms in the UK has fallen by more than 15% since Labour introduced its 2008 £30,000 annual levy for non-doms - specifically those who keep the earnings away from the UK tax system for more than seven years after being settled in the UK.

Levy raise

Osborne though is raising this levy to £50,000 come April, for non-doms who have lived in the UK for more than 12 years. Although some non-doms may claim the force of the levy is causing their number to reduce, it's also likely that general global economic anxiety may have also caused some non-dom 'churn'.

There are also new rules to allow non-doms to invest in UK businesses without paying tax from 6 April. Enough to keep non-doms sweet perhaps, if they can actually work out the often misunderstood UK tax resident rules.
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