The UK government is reviewing its recent move to impose inheritance tax on global assets of non-domiciled residents, following a wave of departures among high-net-worth individuals and lobbying from the City of London. According to the Financial Times, Chancellor Rachel Reeves is open to reversing this component of the non-dom regime overhaul, introduced in April, amid concerns over its impact on international competitiveness.
A senior government official acknowledged that taxing global assets at 40 per cent was “causing most heartburn”. Another official told FT that changes could be made if it benefits Britain’s economic position. According to one City financier familiar with Reeves’ stance, the government is seeking a way to “backtrack without backtracking” on the inheritance tax changes. Another City executive said, “There will most likely be some tweaks to inheritance tax to stop the non-dom exodus.”
The abolition of the non-dom tax regime and the closure of offshore trust loopholes have already triggered relocations to lower-tax destinations such as the UAE, Italy, and Switzerland. High-profile names like steel tycoon Lakshmi Mittal and Egyptian billionaire Nassef Sawiris are among those reportedly exiting the UK.
“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,” the Treasury said.
The non-dom reforms were originally announced under the Conservative government and confirmed in Reeves’ October Budget. Reeves is said to be “listening” to concerns raised by the City. “We aren’t complacent,” said one ally. “We want to make sure Britain is an attractive place to be. We are getting a lot of feedback.” Inputs are reportedly being relayed by Number 10 adviser Varun Chandra and Business Secretary Jonathan Reynolds, who have received concerns from international investors.
Alastair King, Lord Mayor of the City of London, has also expressed apprehensions, linking the policy changes to risks for the City’s future. Alongside the non-dom issue, the removal of VAT exemptions for private school fees and inheritance tax amendments have raised alarm among financial professionals. “Lots of people in the City, not just billionaires,” have been affected, one broker told the Financial Times.
Despite internal debate, any rollback may pose political risks for Reeves. The Labour government has already reversed a plan to end winter fuel payments for 10 million pensioners and is seeking to save £5 billion by reducing sickness and disability benefits.
The Opposition had earlier projected that closing the trust tax loophole would raise £430 million annually. However, the Office for Budget Responsibility has downgraded that estimate to £200 million by 2029–30.
Reeves’ Budget last year also reformed agricultural and business property reliefs, making more estates and companies liable for inheritance tax. From April 2026, assets above £1 million will be taxed at 20 per cent. Legal experts have flagged this as a fresh cause for business owners to leave the UK. “By forcing people to leave the UK, you don’t get 20 per cent of the value of their business, you get 0 per cent,” said Ceri Vokes of law firm Withers.
A final decision may be announced in the autumn Budget, depending on the Treasury’s assessment and the political calculations ahead.
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