UK in ‘open dialogue’ on rich foreigner taxes, minister says

THE UK is in ongoing discussions with wealthy foreigners about the taxes they pay in Britain, following a backlash against a fresh crackdown on the so-called non-dom regime introduced by Chancellor of the Exchequer Rachel Reeves at last year’s budget.

“There’s been a really open dialogue with Indian investors and the Chancellor about these schemes,” Investment Minister Poppy Gustafsson said on Wednesday (Feb 26), when asked if the government is preparing to make any changes to its tax plans.

“There’s been a lot of open conversations. She’s heard their concerns and talked to them openly about the challenges she’s trying to solve. It feels like there’s a really warm, collaborative dialogue there,” Gustafsson said.

Reeves’ move to scrap the preferential tax regime – which allowed foreign residents to not pay UK taxes on their overseas earnings for as long as 15 years – and replace it with a residency scheme has provoked the ire of the ultra-rich. They are particularly concerned about overseas earnings becoming subject to inheritance tax, a policy that finance chiefs have told Reeves would deter talented foreigners from wanting to come and work in the UK.

Gustafsson said Reeves is trying to create a tax structure that is seen as fair by people in the UK, but that they also want to attract talented people and make them feel welcome.

“This certainly should not be interpreted as a snub against them,” Gustafsson said. “We absolutely are in for business with them and we want people to come and invest in the UK.”

Private investment is crucial if the Labour government is to deliver on its election promise to turbo-charge economic growth and raise living standards. However, critics say that ambition is being undermined by the October budget, which raised taxes by over £40 billion (S$68 billion) with domestic businesses and non-doms bearing the brunt.

Government data indicate there were 74,000 individuals claiming non-dom status in the UK the 2022 to 2023 tax year. A study in 2022 found that Indian nationals accounted for almost 14 per cent of the total in 2018, up from around 4 per cent in 2001. India, the US and Western Europe made up the vast majority of non-doms, though there had been a rapid rise in numbers from China and former Soviet states.

Trade talks

The plan to replace the non-dom regime was drawn up by the previous Conservative government, but the details around inheritance tax announced by Reeves went further than expected. Reeves told a meeting of finance chiefs earlier this month that the government is looking closely at data tracking how many rich foreigners are leaving Britain and is considering changes to the Finance Bill going through Parliament.

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One such change already announced is a tweak to the so-called temporary repatriation facility (TRF), which allows non-doms to bring previously earned foreign income and gains into the UK at a reduced tax rate. The government is planning to give easier access for some individuals to the TRF, sources familiar with the matter previously told Bloomberg. Reeves herself said in Davos that the TRF would become “more generous”.

Gustafsson’s comments came as Britain and India resume long-running trade negotiations that were paused last year due to national elections in both countries. For UK Prime Minister Keir Starmer, securing a trade deal with the world’s fastest-growing major economy is high on the agenda to boost economic growth. That goal has been complicated by US President Donald Trump’s tariff threats, which have the potential to upend the global trade.

For India, if concluded, it would be its most ambitious deal yet, underscoring its growing appeal among investors looking to de-risk and diversify away from China. The resumption of talks comes when New Delhi is also racing to seal a trade deal with the US by fall, and avoid the brunt of Trump’s trade barriers. BLOOMBERG