Reeves considers softening inheritance tax changes amid non-dom backlash
Rachel Reeves is considering caving in to City lobbying and softening changes to inheritance tax that affect wealthy individuals who would previously have been 'non-doms', reports suggest.
In her autumn budget, the chancellor confirmed that she would scrap the non-dom tax status, which allowed wealthy individuals with connections abroad to avoid paying full UK tax on their overseas earnings.
'Those that make the UK their home should pay their taxes here,' she said at the time.
Jeremy Hunt, her predecessor, had already sounded the death knell for non-dom status, but Reeves's changes were expected to raise an additional £12.7bn over five years.
She then announced minor adjustments to the transitional arrangements to the new regime at the Davos summit in January, after a backlash from some wealthy individuals.
However, Reeves is now reportedly considering modifying changes that came into force in April, which make the worldwide assets of all UK residents subject to inheritance tax (IHT) at 40% – even if these are placed in trusts, according a report in the Financial Times.
Responding to the report, a Treasury spokesperson said: 'As the chancellor set out at spring statement, the government will continue to work with stakeholders to ensure the new regime is internationally competitive and continues to focus on attracting the best talent and investment to the UK.'
There have been reports of an 'exodus' of wealthy individuals from the UK, though these have been questioned by some analysts – including in a recent study from the thinktank the Tax Justice Network.
When it projected the revenue from closing non-dom loopholes at Reeves's autumn budget, the independent Office for Budget Responsibility allowed for an additional 12%-25% of non-doms to leave the UK this year.
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But Reeves is keen to mollify wealthy global investors, as the Treasury is determined to attract foreign investment into the UK, as part of its mission to kickstart economic growth.
She already faces a challenging fiscal picture in the run-up to the autumn budget, as the OBR is expected to revisit its optimistic productivity forecasts, potentially downgrading growth projections as a result.
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