Chancellor Rachel Reeves is considering reversing a key part of her non-dom tax reforms following an exodus of wealthy individuals from Britain. The Treasury is reportedly reviewing changes to the inheritance tax on non-doms’ worldwide assets, which has been hit with a 40% charge since April.
Insiders familiar with the discussions confirmed that a review is currently underway, with one government official admitting that the exposure of global assets to inheritance tax is “causing most heartburn.” It’s understood that the pressure to review this element comes after some high-profile departures. Steel magnate Lakshmi Mittal and Egypt’s wealthiest man, Nassef Sawiris, have either already left the UK or are planning to due to the new tax rules, reported GB News.
The government’s focus is on adjusting the inheritance tax to prevent wealthier individuals from moving abroad. Wealthy Britons have been relocating to more tax-friendly destinations like the UAE, Italy, and Switzerland in response to the reforms.
A Treasury official revealed that they are “actively reviewing” the inheritance tax changes and would amend the policy if it proved harmful to Britain’s global competitiveness. The Treasury also emphasized its ongoing commitment to working with stakeholders to ensure that the UK remains attractive for international talent and investment.
Initially, the non-dom tax system overhaul was announced by the previous Conservative Government, and it was then confirmed by Reeves in her October Budget. At the same time, she introduced measures to close a loophole that had allowed offshore trusts to avoid inheritance tax. However, some City figures and international investors have raised concerns about the impact of these changes.
According to one financier in regular contact with Reeves, the government is now trying to figure out how to “backtrack without backtracking” on the non-dom reforms. Another senior figure predicted that “there will most likely be some tweaks to inheritance tax to stop the non-dom exodus.”
Reeves is reportedly listening to feedback from the City and other stakeholders, with allies stressing that the Chancellor doesn’t take these concerns lightly. One ally said, “We aren’t complacent. We want to make sure Britain is an attractive place to be. We are getting a lot of feedback.”
In addition to concerns raised by business owners, the Lord Mayor of the City of London, Alastair King, has also warned the Treasury about the potential threats to the financial sector in the wake of these tax changes.
However, reversing any part of the non-dom reforms could be politically challenging for Reeves. She is already under fire for a recent U-turn on plans to remove Winter Fuel Payments for 10 million pensioners. Plus, she is currently overseeing £5 billion in cuts to sickness and disability benefits.
Reeves’ reforms have been popular with many in the Labour Party, as the crackdown on non-doms was initially considered one of their most attractive policies. The opposition had estimated that ending the tax break on trusts would generate £430 million annually, but the Office for Budget Responsibility has since projected that it will only raise £200 million a year by 2029-30.
Any changes to the non-dom regime would likely be announced in the autumn Budget. However, some believe Reeves may hold firm on the issue despite growing concerns from the business community.
The new inheritance tax changes affecting agricultural property relief and business property relief have also sparked concern. From April 2026, those with significant estates or companies that were previously exempt will face a 20% inheritance tax on assets over £1 million.
Ceri Vokes, co-head of private client and tax at Withers law firm, warned that if these changes aren’t reversed, it could lead to a “further exodus of business owners from the UK.” She added, “By forcing people to leave the UK, you don’t get 20% of the value of their business, you get 0%.”
It seems clear that the government is under mounting pressure to rethink its stance on the non-dom reforms, especially as more and more people in the City, not just billionaires, are feeling the impact.
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