Living in the U.K. Just Got More Costly
“Non Domiciles” or non-doms are what U.S. expats living in the U.K. are called. Like other U.S, expats, they’re facing increased U.S. income taxes because they cannot offset their income by deducting their living cost abroad. Now they’ll have to pay an additional fees to the U.K. and these charges cannot be used to offset U.S. taxes.
Under the new law, the U.K.will charge an annual £30,000 (about $59,000) flat-rate fee on non-doms who have had this status for seven years. This includes all those living in Britain who declare that their home is in another country. The U.K. is not calling it a tax and the U.S. isn’t recognizing it as such, which is why it can’t be used as a tax credit in the U.S.
Until now, non-doms have not been taxed on their worldwide wealth, just on the money they earn in Britain or bring into the country. This has made London a mecca for the very wealthy and for high earners, who have lived here virtually tax-free, at least as far as U.K. taxes go. U.S. citizens are taxed on their worldwide income.
Many of these non-doms are investment bankers working in “the City,” London’s financial district. All in all, some 115,000 currently have non-dom status. Only about 10,000 are estimated to be from the U.S.
In today’s global economy, multimillionaires and billionaires are minted every minute. Some are from the BRIC countries - Brazil, Russia, India and China - but many are from France and Germany as well as elsewhere in Europe, Latin America and Asia. London has been a favorite destination until now, which is one reason London real estate has become so expensive.
For the richest of the rich, paying the fee won’t be a problem. However, the new rules will most likely mean that many of those with wealth will chose to live and work elsewhere. In addition, private banks will probably move their income offshore and London will cease to be the financial center it is now. It’s not just non-doms who’d like to see the new laws repealed.