In light of the upcoming tax changes, many Asia-based clients are planning to leave the United Kingdom and seek more business-friendly jurisdictions, according to St. James’s Place’s Tony Müdd.

On October 30, the UK is expected to announce a raft of tax changes affecting non-domicile status and inheritance tax (IHT) as part of broader plans for the Labor Government to raise between 15 billion and 20 billion British pounds ($26 billion).

According to a report by UK-based wealth manager St. James’s Place, non-domiciles will be liable to pay tax on worldwide income and gains after being resident in the country for four tax years, effectively removing the concept of the remittance basis of taxation. IHT protection available to trusts established by non-domiciles will also be removed.

Regional Response

The report notes that many in Asia are rethinking their tax residency status in the UK.

«Many of our Asia-based clients are already making firm plans to remain outside of the UK permanently and taking advice to understand the limits for visiting the UK to remain non-UK tax resident,» said Tony Müdd, divisional director – development & technical consultancy, St. James’s Place.

«Those accelerating plans to become non-UK tax residents and permanently relocate outside of Britain are likely to consider business-friendly jurisdictions with competitive tax regimes, including Hong Kong and Singapore, as they choose their new home. These jurisdictions could reap the long-term economic benefit as high earners establish their new tax domiciles.»

What’s Next?

Despite the major shift underway, Müdd suggests that most people should simply stay put for the time being.

«On a practical basis, the answer for most people is to do nothing right now. It is rarely wise to base any major financial decisions on conjecture, or to let the tax tail wag the dog,» he said, adding that there is a five-month window to assess the situation as the changes will only take effect from the start of the 2024-25 financial year.

«Perhaps the only exception to this rule is non-domiciles who intend to return to the UK and are likely to be subject to IHT. Establishing a trust prior to the Budget in the hope that rules will not be retrospective could be worth exploring. For everyone else, watch this space. The one thing I can guarantee ahead of October 30 is that this year’s Budget will be anything but boring.»