From April 2017, anyone resident in the UK for more than 15 of the past 20 years will pay full British taxes on all worldwide income and gains.
In the full 123 page Budget document, the Government also announced that from 2017 it will no longer be possible for somebody to claim non-dom status on the basis of their father’s place of birth.
“Non-dom status was meant to be temporary, but it became permanent for some people. Not any longer,” said Osborne in his speech to Parliament.
“It is not fair that people live in this country for very long periods of their lives, benefit from our public services, and yet operate under different tax rules from everyone else.”
Additionally, the Government will introduce new rules from April 2017 to ensure that everybody who owns residential property in the UK avoiding inheritance tax by holding it in an offshore structure.
From next year, it will also invest £36m to tackle serious non-compliance by trusts, pension schemes, and non-doms.
Non-doms are able to claim the remittance basis of taxation, which does not tax foreign income and gains as long as they are not brought to the UK.
To access the remittance basis, longer term UK resident non-doms need to pay an annual remittance basis charge of up to £90,000.
Surprisingly, the government did not introduce a minimum claim period for the remittance charge, as many had expected.
In his speech, Osborne also made a passing reference to Labour’s plans to completely abolish the controversial status during their campaign for the 2015 general election.
“Simply abolishing [non-dom status] altogether, would, as Ed Balls correctly noted, probably cost the country money,” he said.
Today’s Budget follows the Conservatives majority victory in May’s UK General Election and represents the party’s first standalone Budget since 1996.
Andrew Sneddon, partner and head of tax at international law firm Trowers & Hamlins, said the abolition of permanent non-domiciled status risks an exodus of wealthy individuals prior to reaching 15 years residency.
“Such indiviudals will need to review their position before April 2017,” he said.
Kay Aylott, senior tax manager at accountancy firm Kreston Reeves, said that banning inherited non-dom status is only likely to affect around 1000 people.
However, she added that there is still time for all non-doms losing their status from 2017 to prepare themselves: “The mass exodus of wealthy individuals that some have predicted is unlikely but there is now a window of opportunity for non-doms to get their overseas assets in order so as to minimise the impact of UK taxation on their worldwide income and gains.”
Sophie Dworetzsky, partner at international law firm Withers, described the announcements as the “most seismic change” to personal wealth tax policy in over a decade.
“Currently, non-domiciled UK residents contribute around £8.2bn annually to the economy,” she said. “In an attack on the remittance basis, it was announced that after 15 out of 20 years of residence any non-domiciled resident will no longer have access to the remittance basis.
“Detailed need to be clarified, but let’s hope that the Chancellor hasn’t played fast and loose with one of Britain’s major appeals to international wealth creators and entrepreneurs.”
Nigel Green, chief executive of international advisory firm deVere, said the policies were “delusional and naïve” and had “far-reaching, adverse consequences”.