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UK Labour Budget: Key Impacts on Expats, Non-Dom Tax, and Wealth Management




The UK Labour Budget introduces sweeping changes, significantly impacting both UK-based expats and cross-border wealth management strategies. For expats and high-net-worth families, the abolition of the non-dom tax regime and new rules on inherited pensions represent key considerations. Here’s a breakdown of what these updates mean for your financial planning.


Abolition of the Non-Dom Tax Regime: Ending a Long-standing Benefit

One of the most significant changes is the end of the non-dom tax status, effective from April 2025. Traditionally, non-dom status offered expats and those with international ties a means to reside in the UK without being taxed on overseas income. However, under the new residence-based tax regime, individuals who make the UK their permanent home will be subject to UK tax on their worldwide income. This adjustment marks a substantial shift for cross-border clients accustomed to more flexible tax planning.


Inheritance Tax Changes: Pensions Brought Into Scope

A critical update is the inclusion of inherited pensions under inheritance tax (IHT) from 2027. Previously, both defined contribution (DC) and defined benefit (DB) pensions were generally exempt from IHT, enabling them to serve as efficient wealth transfer tools for expats and international families. Starting in 2027, however, pension funds passed on to heirs will be included in estate valuations for IHT, potentially increasing tax liabilities, especially for larger estates. For those with UK pensions, this could mean re-evaluating retirement and estate planning strategies to mitigate tax exposure and protect wealth for future generations.


Private School VAT: Increased Educational Costs

The imposition of VAT on private school fees from January 2025 adds an extra layer of expense for families with children in private education. This change could significantly impact expat families who often seek private schooling for continuity in international curricula, meaning an increase in overall living expenses.


Wealth Management Implications for Expats

For high-net-worth expats and cross-border clients, these changes require a careful re-assessment of wealth management strategies. The abolition of non-dom status, for example, may prompt reconsideration of domicile status or shifts in residency plans for clients balancing assets across borders. In addition, IHT’s extension to pensions alters the landscape of legacy planning, especially for those relying on UK pensions as a low-tax inheritance vehicle. This may entail exploring alternate financial structures or revisiting life insurance options to offset IHT obligations on pension assets.


Steps to Take Now

  1. Revisit Residency Plans: With non-dom status no longer an option, cross-border clients should evaluate the potential tax impacts of long-term UK residency.

  2. Revise Estate Planning: For those with UK pensions, planning around the new IHT implications is essential to preserve wealth transfer goals. Reviewing trusts, insurance policies, and investment structures can help reduce tax exposure.

  3. Budget for Increased Expenses: With the VAT on private school fees and adjustments to Capital Gains Tax and National Insurance, UK-based expats should factor in these rising costs in their financial planning.


Final Thoughts and Next Steps

The Labour Budget 2025 aims to increase government revenue while promoting economic stability. Yet for cross-border clients, these changes could present challenges to established wealth management and tax planning strategies. By staying proactive, working closely with tax advisers, and considering alternative structures, clients can navigate this evolving landscape and protect their financial interests.


At MWC Group, we specialize in helping expats and cross-border clients adapt to the latest tax and regulatory changes. If you’re impacted by the new UK Labour Budget, our team can guide you through tailored strategies to safeguard your wealth and optimize your tax efficiency. Contact us to start planning for the future today.


This post is prepared for information purposes only and should not be interpreted as investment advice nor is it an invitation by MWC Group to any person to buy or sell any investment. MWC Group has based this post on information obtained from sources it believes to be reliable.


MWC Group UK is authorised by the FCA FRN 973440 to provide Investment advice and portfolio management in relation to a number of financial instrument. MWC Group UK is a Branch of Manentia Wealth Consulting Group AG which is registered with FINMA as Insurance Broker under number 29575 and member of PolyReg/PolyAsset as Portfolio Manager.


Manentia Wealth Consulting GroupLimited is licensed and regulated by the Malta Financial Services Authority (MFSA) under the Investment Services Act to provide investment services as Portfolio Manager and under the Insurance Distribution Act to act as Enrolled Insurance Broker. Manentia Wealth Consulting Group Limited is a subsidiary of Manentia Wealth Consulting Group AG (Swiss company registered number: CHE-116.117.306).

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