UK to scrap 'non-dom' tax status on foreign earnings

Britain's finance minister Jeremy Hunt on Wednesday said he would abolish a so-called "non-dom" status that let residents avoid tax on overseas income, raising 2.7 billion pounds ($3.4 billion) a year by adopting an opposition Labour Party policy. Non-domiciled status had been available to people who live in Britain but do not consider it their permanent home, and allowed them to opt to pay UK tax only on income earned in, or transferred to, Britain.

Britain's finance minister Jeremy Hunt on Wednesday said he would abolish a so-called "non-dom" status that let residents avoid tax on overseas income, raising 2.7 billion pounds ($3.4 billion) a year by adopting an opposition Labour Party policy.

Non-domiciled status had been available to people who live in Britain but do not consider it their permanent home, and allowed them to opt to pay UK tax only on income earned in, or transferred to, Britain. Hunt said he would replace it with a system which is "both fairer and remains competitive with other countries," adopting similar language to Labour leader Keir Starmer, whose pledge to scrap it was a flagship policy ahead of an election this year.

"The government will abolish the current tax system for non-doms," Hunt said in his annual budget speech, adding that new arrivals would still not be required to pay tax on foreign income and gains for their first four years of UK residency. "After four years, those who continue to live in the UK will pay the same tax as other UK residents."

Labour lawmakers had said the adoption of a key opposition policy would be humiliating for the governing Conservatives, but it could also cause headaches for Starmer's party. Under Labour's previous plans, the abolition of the non-dom tax status was intended to raise funds for greater investment in the state-run National Health Service.

However, Hunt instead said he would use the money raised to fund tax cuts, meaning Labour may come under pressure to announce how they will now pay for their planned investment. Labour has said its spending pledges will be fully funded but it has also promised not to raise taxes on working people or increase borrowing to fund day-to-day spending.

($1 = 0.7863 pounds)