The 2016/17 non-dom tax take was the highest total amount of income tax, capital gains tax and national insurance contributions paid since HMRC started publishing statistics on the group in 2007/08.
The £9.4bn ($12.4bn, €10.6bn) was an increase of £130m from the previous year, when the number of non-doms was around 120,000, figures from HMRC show.
Tax year 2016/17 marks the first time that the number of non-doms dropped below 100,000 since 2007/08.
The fall in individuals claiming non-dom status was attributed to two main factors:
- Taxpayers switching their status from non-dom to domiciled and continuing to pay tax in the UK; and,
- Non-doms who contributed very little tax in 2015/16, who left the UK tax system in 2016/17, evidence by the number of non-UK resident non-doms dropping to 14,300 from 33,600 over the period.
Sweeping changes to the taxation of this group came into effect in April 2017, with those residing in the country for more than 15 out of the past 20 years becoming deemed domiciled.
Additionally, the deemed domicile test for inheritance tax was shortened to 15 years from 17.
No Brexit flight of the non-doms
“The drop off in non-doms is perhaps not as impactful as it may first appear and may be more to do with HMRC getting on top of its admin rather more than any radical action taken by non-doms themselves,” said Lucy Brennan, partner in the private wealth team at accountancy firm Saffery Champness.
“The drop off doesn’t yet indicate a post-Brexit flight of the non-doms and it may be some years to come before we see any statistics around Brexit, given that the final outcome of our negotiation is still unknown.”
Brennan added that the economic contribution of non-doms “should not be underestimated”.
“While the tendency is to focus concern on whether non-doms are paying the right tax, the investments they make are also incredibly valuable to UK PLC and it must be highlighted these are funds that would likely remain offshore if [Business Investment Relief] was not available.”
The total amount invested in UK businesses by non-dom taxpayers since the relief scheme was introduced in April 2012 is almost £2.5bn.
She said: “We have not yet seen the new non-dom rules start to bite, in terms of a radical hit to numbers of the tax take.
“While the new rules may have an effect on non-dom numbers in the next year or so, with people becoming deemed-domicile in the UK far sooner the tax take itself may actually increase as more worldwide income comes into HRMC’s purview.
“In addition, the concessions available for the first two tax years the rules are in place are seeing many non-doms bring capital into the UK as well as some funds that are being taxed in the UK, so we may see a further increase in the tax paid by non-doms as well as there being more funds available for UK spend and investment,” Brennan said.