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Is your camel's back broken yet? Or will this year's Autumn Budget be the proverbial last straw? And who knows what Rachel Reeves (or her successor) may have in store next year?
The 2024 Autumn Budget in the UK introduced an immediate rise in capital gains tax (CGT) and changes to the taxation of international individuals, most of which took effect on 06 April 2025.
"Non-dom tax changes"
Without dwelling on the details (you may be familiar), many non-UK domiciled individuals have found that remaining a UK resident now brings with it the dubious privilege of substantially increasing:
- Income tax and CGT that must be paid on their own income and capital gains;
- Inheritance tax (IHT) due on their own estates, including on lifetime gifts they make; and
- Income tax, CGT, and IHT payable on trusts they have set up.
This has spurred many individuals to leave the UK.
Increased tax for all UK residents
These tax increases not only affect clients who have moved to the UK, they affect UK-born individuals too. To reduce income tax and CGT exposure, many may need to spend six consecutive tax years abroad. Individuals may even need to spend up to 10 years as a non-resident before they can escape IHT on their foreign assets.
Autumn 2025 Budget
Concerns that Reeves might raise CGT further or introduce an "exit tax" (on those becoming non-resident) or a wealth tax have proved unfounded (so far). Nevertheless, on top of the additional 2% on dividends, savings and rent, she has introduced a "mansion tax" (of GBP 2,500 to GBP 7,500 each year) on properties worth over GBP 2 million. There is little to discourage wealthy entrepreneurs from leaving, as the dent their UK tax liabilities will make when selling their businesses starts to resemble a sinkhole, and they are questioning whether staying in the UK is worth it.
Leaving the UK
The question that we are repeatedly asked is: can I stop being UK resident and still spend time here each year?
The answer is yes, but the rules vary by individual. If a person has been in the UK since 06 April 2025, aside from short holidays, they are likely to be a UK resident for this tax year under the UK's "statutory residence test" (although a double taxation treaty may treat someone who is a "dual resident" as not resident in the UK).
However, that's not the end of the story. If a person is a UK resident this year, they may be able to "split" the year into UK and non-UK resident parts. This is only possible in limited cases. It is generally safer to arrange your affairs so that you do not have to rely on "split year" treatment or on a double taxation treaty.
If you decide to bring your UK tax residence to an end, you must be sure that you know (a) how to achieve that, and (b) how to remain non-UK resident. The time you can spend in the UK each year and still be non-UK resident can vary, and there are some traps within the statutory residence test. Getting clear advice is critical.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
