The new tax rule in the UK, expected to be implemented from April 2025, has become a cause of worry for non-resident Indians (NRIs) and recent migrants to the country.
With the new tax order, they might end up paying more taxes and need to plan carefully. This could also make the UK less attractive for people wanting to move there. Let’s look at what the new tax rule proposed in the UK says.
The new tax rule in the UK will abolish a 200-year-old feature of the British Tax System. In its spring Budget, the UK Government proposed to change how it taxes UK resident non-domiciled (non-doms) individuals.
What is the New Tax Rule in UK
Currently, Non Resident Indians (NRIs) in the UK don’t have to pay tax on the income they make in India. They have pay tax only when they remit such income to the UK. This tax treatment is available for first 15 years. After these years, an individual is treated as domiciled and his/her entire global income is taxed in the UK.
But the new rule would only give a 4-year tax break on foreign income for new UK residents. After that, they would be taxed on all their global income.
For example, if an NRI moved to the UK three years back, s/he would able to claim tax break only from three more years if the new rule comes into effect.
For those in the highest tax band, the UK currently charges 40% tax on dividend income and 45% on other income. However, NRIs pay much less.
Also Read: How much salary will you need for UK Skilled Worker Visa from April 2024?
NRIs, who moved to the UK 10 years ago and are currently non-domiciled, could face a 50% tax on their foreign income in the first year, according to an estimate. Additionally, remittances to the UK for foreign income earned before 2025 might be taxed at 12% for the first two years.
The new tax rule may affect the UK’s appeal among wealthy Indians. Reducing the tax exemption period from 15 to 4 years might make the UK less enticing compared to countries like Spain, Portugal, Italy, Malta, Greece, and Switzerland. All these countries have their versions of non-domicile tax systems.
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