Spring Budget 2023: No further changes for non-doms

Despite ongoing political debate, the Budget did not contain any major announcements specifically targeted at non-UK domiciled taxpayers. Changes cannot be ruled out in future, particularly as we move closer to the next general election.

Plane Sunset
James Carn and Angela Hughes
Published: 16 Mar 2023 Updated: 29 Mar 2023

Speculation over changes

The UK tax position of non-UK domiciled individuals has seen significant changes over the past 15 years, with especially significant reforms taking place in 2008 and 2017. Since 2017, the rules have remained relatively stable and until recently the treatment of non-UK domiciled individuals appeared to have fallen down the political agenda. The tax treatment of non-UK domiciled individuals has however received greater attention in recent months. In particular, the Labour Party has stated an intention to ‘abolish non-dom status’ if they form a Government after the next general election. There has, therefore, been some speculation that the current Conservative Government might be inclined to tighten the existing rules or at least announce a review or consultation on changes to existing legislation.

For the time being, non-UK domiciled individuals can continue to take advantage of the opportunity to be taxed on a remittance basis and be subject to inheritance tax only on UK situated assets. This assumes individuals have retained their non-UK domicile, and are not deemed-UK domiciled, either because they have been UK resident for more than 15 of the previous 20 tax years or because they were born in the UK with a UK domicile of origin.

The Government will hope that this helps the UK to remain an attractive destination for inward investment. For the UK’s domicile rules to remain competitive in Europe, we would prefer not to see further tinkering with the system increasing complexity and decreasing confidence. The UK has been an attractive jurisdiction on the basis of political and economic stability, both of which have faced recent challenges. Individuals moving to the UK often contribute a huge amount to the UK economy, through paying employment taxes, national insurance, property taxes including SDLT, as well as substantial amounts of VAT through spending. After a period of time in the UK, inevitably they also pay personal taxes in one form or another.

Evidencing domicile status

Recent cases, including Coller v HMRC [2023] and Henkes v HMRC [2020] have also underlined the importance of keeping domicile status under regular review, especially where specific reliefs are being relied upon. In particular, if a UK resident taxpayer claims to be domiciled outside the UK, they must be able to show that they do not intend to reside in the UK on an indefinite basis.

There should be a clear contingency on which a non-UK domiciled individual will cease to be UK resident and, if they claim to have retained a domicile in their country of origin, a taxpayer should be able to demonstrate continuing social and economic ties to that country.

Following HMRC’s successes in these cases, HMRC may be encouraged to test the domicile status of UK resident taxpayers on a more frequent basis, with older, long-term UK resident individuals being particularly vulnerable to challenge.

Non-UK domiciled individuals will welcome some continuing stability.

That said, change cannot be ruled out either by a new Government, or by the current Government in an attempt to steal a march on the opposition ahead of the next UK general election, likely to take place in the autumn of 2024 or soon after. We would encourage individuals to review their domicile status and the evidence they keep to demonstrate that, and to review their existing arrangements to make them as future-proof as they can.

Detailed analysis

New elective accruals basis for taxation of carried interest

The Government will legislate to allow investment managers who receive carried interest to elect to be taxed on an accruals rather than receipts basis. This will assist with claims for credit for non-UK tax paid on the carried interest.


Individuals working in private equity are typically rewarded in part through ‘carried interest’, which is a capital entitlement due to them as a result of successful investments by the funds for which they provide investment management services.

In the UK, carried interest is chargeable to capital gains tax, albeit at the higher rates of 18% or 28%.

Carried interest is taxed in the UK when it arises to the individual, but often, where funds operate in multiple jurisdictions, individuals can be subject to tax in more than one country on their carried interest receipts. These different jurisdictions may apply tax on a different basis and at different times, which can create difficulties when claiming relief against the UK tax, even where a double tax treaty applies.

The Spring Finance Bill 2023 will contain provisions allowing individuals entitled to carried interest to elect to be taxed at an earlier point on their entitlement. This will allow them to align the UK and non-UK tax points, thereby ensuring they are eligible for double tax relief.

Our comment

Carried interest often forms a large and important part of the reward package for those working for private equity funds, but the tax treatment of it can be complicated, with the complication compounded where there are inter-jurisdictional elements to consider.

This proposal directly addresses an issue that can often arise for those entitled to carried interest, so will be welcomed by those affected.

US citizens who are resident in the UK may benefit from these proposals, as the timing of carried interest is often earlier under US principles compared to UK. This may make it easier to claim double tax relief and avoid double taxation.

The Government will also hope that this helps the UK to remain an attractive jurisdiction from which to operate private equity funds.

When will it apply?

For tax years 2022/23 onwards.

Reforming pension tax thresholds

The pension lifetime allowance charge will be removed, before it is fully abolished in a future Finance Bill. Alongside this major change, increases in the annual allowance, the money purchase allowance, the minimum tapered allowance, and the minimum tapered allowance income threshold were also announced.


The lifetime allowance is the maximum amount that can be held in a pension before it is subject to an additional tax charge.  Currently, the allowance is £1,073,100. From 6 April 2023, the lifetime allowance charge will stop being levied and from April 2024 the lifetime allowance itself will no longer exist. This means that an individual is no longer restricted on the total amount that can be held in the pension fund.

Despite the lifetime allowance being removed, there will still be a restriction on the total amount of tax-free cash that can be taken from a pension. This will be limited to 25% of the current lifetime allowance, which equates to £268,275. That said, anyone with any form of lifetime allowance protection will still be entitled to a higher level of tax-free cash. It is not yet clear whether or not making future pension contributions will result in this protection being lost.

The annual allowance for pension contributions will also increase from the current level of £40,000 to £60,000, and the ability to carry forward unused allowances for three tax years will remain in place.

Annual allowance tapering will also remain but the threshold after which the annual allowance will be reduced will increase from £240,000 to £260,000. The minimum annual allowance after tapering will increase from £4,000 to £10,000.

Finally, the money purchase annual allowance will increase from £4,000 to £10,000.  The money purchase annual allowance may apply if an individual has already started to draw an income from their pension.

Our comment

Following many years of restrictions being applied to pension savings, this is certainly welcome news. Relaxation of allowances was expected, with specific reference made to NHS doctors, where reports suggested 80% were being caught by the lifetime allowance charge when retiring.

The announcement however takes this further than anticipated with the abolition of the lifetime allowance.

As the Chancellor pointed out, this will not only benefit NHS doctors but also many other pension savers who were reluctant to continue saving into their pension for fear of breaching the lifetime allowance.

As pension funds usually fall outside the scope of IHT, this abolition has the added advantage for taxpayers of providing additional shelter from IHT.

While the lifetime allowance means there is no restriction on the size of a pension pot when taking benefits, tax-free cash will still be limited to 25% of the 2022/23 lifetime allowance.

Additionally, the annual allowance restriction and tapering rules still remain in place, which will limit a high earner’s ability to save into their pension.

Overall, however, a positive set of announcements for those looking to save for the future via a pension.

When will it apply?

From 6 April 2023.

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication.

Tax legislation

Tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. You should always seek appropriate tax advice before making decisions. HMRC Tax Year 2023/24.