The potential withdrawal of the United Kingdom’s resident non-domiciled tax regime will most likely impact different individuals in various ways. The exact size and scope of the changes remains to be seen, but with the new rules potentially coming into force from 6 April 2025, the best approach for anyone who will be affected is to start planning and considering different scenarios.

What is the UK non-dom tax regime?

“Non-dom” describes a UK resident whose permanent home – or domicile – for tax purposes is outside the United Kingdom. This refers to a person’s tax status, not to their nationality, citizenship or resident status – although it can be affected by these factors.

In short, a non-dom only pays UK tax on the money they earn in the UK. They do not have to pay UK taxes on money made elsewhere in the word. For wealthy individuals, this currently presents the opportunity for significant and entirely legal savings.

How are the non-dom rules changing?

The headline change of the proposal is the non-doms’ ability to pay tax on a remittance basis. Under the proposed rules, people who moved to the UK would not have to pay tax on money they earned overseas for the first four years. After that period, if they continued to live in the UK, they would pay the same tax as everyone else.

The proposed non-dom rule changes will affect different people in different ways. These people might turn to other countries to find viable alternatives.

Swiss lump-sum taxation – a viable alternative?

The Swiss expenditure-based taxation, also referred to as lump-sum taxation, is a simplified assessment procedure for foreign nationals who are domiciled in Switzerland but are not gainfully employed in the country.

The regular tax rates are applied in calculating the tax amount. However, the tax is calculated on the basis of the annual cost of living expended by the taxpayers in Switzerland and abroad for themselves and their dependents. The law also provides for minimum values for the assessment basis and a minimum calculation according to which the tax may not be lower than the tax on specified gross elements of income and wealth in Switzerland calculated with the regular tax rate. This income includes in particular all income from Swiss sources, as well as income for which the taxpayer claims relief from foreign taxation in accordance with a double taxation agreement concluded by Switzerland.

The lump-sum taxation regime is a very attractive and internationally favorable tax regime for foreigners with a relatively low tax burden. It also provides access to the wide range of double tax treaties that Switzerland has concluded. Lump-sum taxation is available in every canton, except for Appenzell Ausserrhoden, Basel-Landschaft, Basel-Stadt, Schaffhausen and Zurich.

The application for Swiss lump-sum taxation can be filed with the Swiss tax authorities before the move into the country. Do not hesitate to contact us should you wish to find out if the Swiss lump-sum taxation could also be beneficial in your personal situation.