The End of Non-Dom Status: Implications for South Africans in the UK

The UK’s non-domicile (non-dom) tax regime, a cornerstone of its fiscal framework for over two centuries, allowed individuals with a permanent home outside the UK to avoid tax on foreign income and gains unless remitted to the UK.

On April 6, 2025, this system will be abolished, replaced by a residence-based tax regime following the passage of the Finance Bill 2024-25.

For the estimated 200,000 South Africans (Saffas) in the UK—many of whom leveraged non-dom perks—this shift brings significant financial, lifestyle, and strategic implications.

This report examines the policy change, its mechanics, and its impact on Saffa expats, from wealthy investors to middle-class professionals.

The New Regime: Key Features

Under the current non-dom system, Saffas could reside in the UK while shielding offshore income (e.g., South African rental earnings or investments) from UK tax, provided it stayed abroad. The new rules dismantle this:

• Four-Year Foreign Income and Gains (FIG) Regime: New UK residents, including those absent for 10+ consecutive years, get a four-year tax holiday on foreign income and gains, even if remitted to the UK. After this, worldwide income is taxable.

• Long-Term Residents: After four years, or immediately for those already UK-resident beyond this threshold by April 2025, all global income and gains are taxed on an arising basis.

• Inheritance Tax (IHT): IHT shifts to a residence test—10 years in the UK out of the last 20 triggers liability on worldwide assets, with a 10-year “tail” post-departure.

• Temporary Repatriation Facility (TRF): Pre-April 2025 foreign income can be brought to the UK at reduced rates (12% for 2025-26 and 2026-27, 15% for 2027-28) for three years.

• Trusts and Capital Gains: Trust protections erode, taxing settlors on foreign trust income post-April 2025, while capital gains tax (CGT) rebasing to April 5, 2017, offers transitional relief for some.

Implications for South Africans

1. Financial Impact

For wealthy Saffas—think Johannesburg business owners or Cape Town property magnates—the loss of non-dom status is a seismic shift. Previously, they could park offshore wealth in South African trusts or accounts, avoiding UK tax indefinitely. Now, after four years, UK tax rates (up to 45% on income over £125,140 and 28% on gains) apply to all earnings, slashing net returns. A Saffa with £500,000 in annual offshore dividends, once untaxed, could face a £225,000 UK tax bill post-transition.

Middle-class Saffas, like professionals on work visas, feel the pinch differently. Many remit South African savings or pensions to fund UK living costs. The four-year FIG window eases this initially, but post-2029, remittances trigger full taxation, squeezing budgets already strained by London’s high costs. For example, a £50,000 South African pension remitted annually could shrink by £22,500 in tax after year four.

The TRF offers a lifeline for pre-2025 wealth. A Saffa with £1 million in accumulated offshore gains could repatriate it at 12% (£120,000 tax) versus 28% (£280,000) later, incentivizing early action. However, this requires liquid funds and tax planning—barriers for less affluent expats.

2. Lifestyle and Mobility

The policy reshapes Saffa migration patterns. New arrivals gain a four-year buffer, making the UK attractive short-term. A young Saffa engineer moving in 2025 could save tax on South African side-hustle income until 2029, bolstering early UK settlement. Yet, long-term residents—say, a family in Surrey since 2010—face immediate taxation on global assets from April 2025, prompting some to reconsider staying.

Inheritance tax looms large for older Saffas. Under the old rules, non-UK assets (e.g., a Durban holiday home) dodged IHT unless deemed domiciled (15/20 years). Now, 10 years of residence triggers exposure, with a 40% rate on estates over £325,000. A £2 million South African property, once IHT-free, could cost heirs £800,000, pushing families to sell or relocate before the clock ticks.

Mobility takes a hit. The 10-year IHT “tail” means leaving the UK doesn’t instantly erase liability—discouraging temporary returns to South Africa. Some Saffas, especially retirees, may eye tax-friendly havens like Portugal or Mauritius instead, where non-dom equivalents persist.

3. Investment and Business Strategies

Saffa entrepreneurs and investors must pivot. Trusts, a popular vehicle for holding South African assets, lose their tax shield. Post-2025, trust income taxes settlors directly, dismantling structures built over decades. A Sandton-based trust yielding £200,000 yearly, once tax-free, now burdens its UK-resident settlor with £90,000 in tax.

CGT changes offer mixed outcomes. Rebasing to 2017 values softens blows for assets held long-term—say, a Saffa selling a £1 million Johannesburg flat bought for £400,000 in 2010, now taxed only on post-2017 gains. But newer investors, or those in trusts, miss out, facing full CGT on disposals.

Business-minded Saffas may shift offshore operations. The UK’s allure as a low-tax base fades, nudging high-net-worth individuals toward Dubai or Switzerland, where tax regimes remain lenient. Oxford Economics notes 80% of non-doms cite IHT changes as a relocation driver—Saffas likely follow suit.

4. Community and Cultural Effects

The Saffa diaspora, tight-knit via braais and rugby watch parties, could thin out. Wealthier expats departing for tax havens disrupt social networks, while new arrivals, lured by the FIG regime, may not stay long-term, diluting community roots. London’s “Little South Africa” in Wimbledon might see turnover spike, with cultural hubs like biltong shops or SA wine bars losing patronage if numbers drop.

Conversely, the four-year window could boost short-term inflows, invigorating Saffa events—imagine more Springbok screenings at The Springbok pub. Yet, the long-term outlook suggests a smaller, less permanent presence as tax pressures mount.

Broader Economic and Policy Context

The UK aims to raise £1 billion annually from these reforms, targeting fairness—long-term residents pay like locals. For Saffas, this aligns with South Africa’s own tightening of expat tax rules since 2020, creating a double squeeze. Critics argue the UK risks losing talent and capital; supporters say it levels the playing field. Saffas, caught in the middle, face a reckoning—adapt, optimize, or exit.

Conclusion

The non-dom abolition reshapes Saffa life in the UK. Newcomers gain a temporary edge, but long-term residents face steeper costs, from income tax to IHT. Financial planning—leveraging TRF, rebasing assets, or restructuring trusts—is urgent before April 2025. Lifestyle shifts, including potential exodus, loom for the wealthy, while community ties may fray. For Saffas, the UK remains a land of opportunity, but one demanding sharper fiscal navigation in this new tax era.

The information in this newsletter is for general informational purposes only and does not constitute legal, financial, or professional advice. Consult a qualified expert before making decisions based on this content.