Point of view: how new tax policies will affect South African expats in the UK

South Africans living in the United Kingdom are facing a seismic shift in tax policy, one that could dramatically alter their financial landscapes. The UK’s non-domiciled (non-dom) tax regime has long provided a favourable structure for South Africans abroad, but from April 2025, that is all set to change.

Di Haiden, CEO of Robert Cowen Investments (RCI), warns that these reforms demand immediate attention. “The end of the UK’s non-dom tax regime marks one of the most significant tax changes in decades. South Africans living in the UK must carefully assess how this will impact their finances, particularly in light of new residency-based taxation rules,” says Haiden.

According to the UN Department of Economic and Social Affairs’ 2020 International Migrant Stock, 247,300 South African emigrants were living in the UK at the time. Fast forward to today, and that number has increased by 50,700 – a jump of 26%. The large turnout of South Africans voting in the UK during South Africa’s May 2024 National and Provincial Elections (NPEs) further underscored the size and influence of this diaspora.

What’s changing? According to Haiden, currently, non-doms – those whose permanent home is outside the UK – can opt to be taxed only on UK-based income and gains, with foreign income only taxed if brought into the UK (remittance basis). However, this will no longer be an option from April 2025. The UK government is abolishing the non-dom regime, replacing it with a residency-based system that will tax UK residents on their worldwide income and gains.

Key changes in brief:

• End of the non-dom regime: Non-doms will no longer be able to use the remittance basis; all UK residents will be taxed on worldwide income and gains.
• Residency-based taxation: The UK will move to a system where tax liabilities are determined by residency under the Statutory Residence Test.
• Foreign Income and Gains (FIG) relief: New UK tax residents (who were non-residents for 10 years prior) will benefit from a four-year exemption on FIG and non-resident trust distributions.
• Inheritance Tax (IHT) shifts: IHT will now be linked more closely to residency rather than domicile. Long-term residents (10 out of 20 years in the UK) will be liable for IHT on their global estate. Furthermore, individuals who have been UK residents for 20 years or more will remain subject to UK IHT for up to 10 years after leaving.
• Transitional reliefs: A temporary 12% tax rate will apply to remittances of foreign income made during the 2025–2027 tax years.

For long-term South African residents in the UK, this overhaul removes many of the tax advantages they previously enjoyed. Those who use offshore structures to manage their tax liabilities will find these options increasingly restricted. Trusts established before 2025 may retain some protections, but overall, the tax burden for many is set to rise.

Conversely, the four-year FIG relief could make the UK more attractive for new emigrants, offering a temporary window of tax-free foreign income and gains. However, this is a far cry from the long-term tax breaks that non-doms previously enjoyed.

With less than a year until these sweeping changes come into effect, those affected need to take proactive steps to assess their financial position. Consulting a UK tax advisor is no longer an option – it’s a necessity.

The clock is ticking.

* Maleke is the editor of Personal Finance.

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