Second home in the UK: radical change in taxation for persons not domiciled in the UK ("non-dom taxation")

One of the reform projects in the UK aims to abolish remittance basis taxation and replace it with a system designed to boost investment and consumption in the UK. This move could affect millions of taxpayers who do not live only in the UK and who earn income outside the UK.

This will especially affect high-net-worth and ultra-high-net-worth individuals and families, who often have at least one of their international residences in the UK.

But what exactly does this mean? And what things do you need to consider if this affects you personally?

Country of residence and source country: principles of international tax law

As a rule, the right of taxation is divided between the country of residence and the source country. The country of residence is the country in which a taxpayer has their domicile or predominantly resides. The source country is the country from which the income originates or with which it is connected. The country of residence generally levies taxes on all income earned worldwide. The source country, on the other hand, only levies taxes on income that originates from or is connected with the source country.

Any double taxation of income from the source country is avoided on the basis of a double taxation agreement or national law. This is achieved either by the country of residence exempting the income from taxation or by offsetting the taxes of the source country. Which country is the country of residence and which one is the source country is determined by where the taxpayer has their domicile or, in the case of multiple domiciles, their habitual residence and/or the focal point of their life.

Previous non-dom-taxationregulations of the United Kingdom

These rules fundamentally also apply in the United Kingdom. Persons who were residentin the United Kingdom without being domiciled there previously enjoyed significant exemptions from taxation (non-UK domiciled or non-domstatus).

Under the previous taxation regime (so-called remittance basis taxation), only income that was "remitted" from abroad to the UK was taxed in addition to the income in the UK. The taxation of income from countries other than the United Kingdom could be prevented in the United Kingdom if the income was not required for investment or consumption in the United Kingdom. This only left a possible taxation in the source country, which may be lower depending on the country and type of income.

The non-dom status also had an impact on inheritance tax. If the domicile was abroad and the taxpayer had not lived in the United Kingdom for more than 15 years, inheritance tax liability in the United Kingdom was limited to assets there. In such cases, double taxation with inheritance tax was therefore not to be feared.

New regulation from 2025

With its jurisdictional basis of "remittance" to the United Kingdom, remittance basis taxation was seen as an impediment to investing in the United Kingdom, as it could be worthwhile from a tax perspective not to invest in the United Kingdom. This mechanism is therefore being adjusted at the start of the 2025 tax year (6 April 2025).

As part of the new rules, there is now only an exemption for foreign income within the first four years after someone has become a resident in the UK. However, unlike previously, the absence of a remittance to the UK is no longer relevant.

The relevant period for inheritance tax has also been reduced from 15 to 10 years. Inheritance tax in the UK therefore must be expected much earlier.


It remains to be seen whether or not the new rules will contribute to more investment in the UK. In any case, the new rules will especially affect many high-net-worth and ultra-high-net-worth individuals and families who have a second home in the UK. According to a study from 2022, 3 out of 10 non-doms had an income of more than £5 million (read more here). By choosing a domicile with a more favourable tax regime, they were previously able to save taxes. This option is now being restricted. Persons affected by this definitely need to check the consequences for their personal taxation and any required action to be taken by them before the changes come into force.

The Private Clients sector group at Oppenhoff stands for first-class, customised advice and support for high-net-worth and ultra-high-net-worth clients, particularly in complex cross-border matters.

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Jan Mohrmann

Jan Mohrmann

PartnerAttorneyCertified Tax AdviserGraduate in Financial Economics (FH)

Bockenheimer Landstraße 2-4
60306 Frankfurt am Main
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David Falkowski

David Falkowski

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50668 Cologne
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Franziska Goetjes<br/>LL.M. (Dublin)

Franziska Goetjes
LL.M. (Dublin)


Konrad-Adenauer-Ufer 23
50668 Cologne
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