Non-dom status: Labour pledges to replace tax-saving scheme

Labour has pledged to replace the so-called "non-dom" taxpayer status in the UK after a row over the finances of Chancellor Rishi Sunak's wife.

The party said it would abolish the "unfair" status, which allows UK residents whose permanent homes are abroad not to pay UK tax on overseas income.

It would bring in a shorter-term scheme for temporary residents.

Shadow chancellor Rachel Reeves said it would end "outdated tax perks".

The UK government said non-doms played "an important role in funding our public services", with tax contributions estimated to be worth £6bn a year.

But a Treasury spokesperson said it was "only right that those who choose to live here for a long time pay their fair share of tax, which is why we reformed the rules in 2017 to end permanent non-dom status".

Currently, non-doms can keep the status for up to 15 years.

• What is a non-dom?

• Sunak: Inquiry into leak of wife's taxes begins

• Sunak's wife to pay UK tax on overseas income

Ms Reeves told the BBC the status "should not be available to a privileged few" at a time when living costs were soaring and taxes going up.

"We need to do more to crackdown on some of the loopholes, which mean some of the wealthiest in society aren't paying their fair share of tax," she said. "If you make Britain your home, you should be paying your taxes here."

Labour has previously been critical of the non-dom arrangement, and had pledged to scrap it under former leaders Jeremy Corbyn and Ed Miliband.

The party said its decision to recommit to removing the status came as part of a wider review of its tax policies, announced by Ms Reeves at Labour Party conference in September.

But it also follows a row earlier this month after emerged that Mr Sunak's wife, Akshata Murty, had claimed non-dom status through her father, Narayana Murty - the billionaire founder of Indian software giant Infosys.

The BBC estimated this would have saved her £2.1m a year in UK tax on dividend payments from her shares in the company.

After a political backlash, Ms Murty announced that although she would remain a non-dom, she would pay UK tax on her overseas income.

Akshata Murty with her husband, Rishi Sunak

Labour has said, if it wins power after the next general election, it would replace the status with a shorter-term arrangement similar to those in France, Germany and Canada.

Ms Reeves said the status could last "as long as five years" for residents who qualify. "But between six months and five years is what other countries do and we would consult [businesses] on that," she added.

Labour has not provided further details of its plan, but said it would be a "clear, simple, and modern system".

Ms Reeves added: "With Labour, people who make the UK their home will contribute to this country by paying tax on their global income."

The Treasury said it considered non-dom status to be an important feature of the UK's tax system and said it wanted to continue attracting "talent to work and live in the UK".

What is a non-dom?

A non-dom is a UK resident who declares their permanent home, or domicile, outside of the UK.

A domicile is usually the country his or her father considered his permanent home when they were born, or it may be the place overseas somebody has moved to with no intention of returning.

For proof to the tax authority, non-doms have to provide evidence about their background, lifestyle and future intentions - such as where they own property or intend to be buried.

Those who have the status must still pay UK tax on UK earnings, but do not need to pay UK tax on foreign income.

They can give up their non-dom status at any time.

According to the latest figures from HM Revenue and Customs, there were 75,700 people claiming non-dom status in the UK in the tax year ending 2020.

Read more here.