UK non-dom Inheritance Tax update: Possible reversal under review

The UK government is reconsidering its recent extension of the 40% inheritance tax (IHT) rate on foreign assets of non-doms, a move that has caused significant concern among international clients and prompted a notable outflow of high-net-worth individuals from the UK. This update is based on the latest available information as of June 18, 2025.

What has changed?

• April 2025: The UK abolished non-dom status and introduced a residence based regime for IHT so that individuals who were non-dom under the old rules will now have their foreign assets exposed to the 40% UK IHT rate once they are long-term resident. In addition, the foreign assets of those relocating overseas will still remain within the UK IHT net up to 10 tax years following their UK departure, subject to transitional rules.
• Immediate impact: This policy change has been widely criticised; and several prominent business figures, including senior bankers and entrepreneurs, have already left the UK, with others reportedly preparing to follow.

Why is the policy under review?

Research indicates that the IHT change is the primary reason for the exodus of wealthy individuals. If 25% of non-doms leave the UK, the Treasury would not see a net gain from this policy. If a third depart, the UK could lose £700 million in the first year alone.

As a result, Chancellor Rachel Reeves is now considering a reversal of the global IHT charge, acknowledging that the reaction has been more severe than anticipated.

What this means for international clients

The situation is still evolving. The government is in active discussions with industry stakeholders to ensure the UK remains attractive for international talent and investment.

A reversal of the global IHT extension is seen as affordable and could be implemented without undermining the broader non-dom reforms. Therefore, clients with international assets should review their estate and succession planning strategies and remain alert for further updates.

Our advice

• Stay informed: We are closely monitoring developments and will provide timely updates as the situation evolves.
• Review structures: I recommend my clients to proactively review their asset structures and consider the potential impact of further policy changes.

If you have any questions, please do not hesitate to reach out to me or another member of the International Tax Team.