Wealthy non doms living in the UK may head for the exit after the Chancellor announced she would end non-dom status, a law firm partner has warned.

Ms Reeves today announced she was scrapping non-dom status.

In addition, offshore trusts will no longer be able to be used to shelter assets from Inheritance Tax and there will be transitional arrangements in place for people who have made plans based on current rules, the Treasury says.

The status allows wealthy individuals to live in the UK in return for paying a minimum payment of, typically, £30,000 a year. Non doms are only been taxed on their UK earnings, not those from overseas.

Ms Reeves said today that a new residence-based regime was needed and this will replace the current non-dom regime from April and will be “designed to attract investment and talent to the UK.”

However, some have warned that scrapping non-dom status will lead to an exodus of wealthy people to the US and other territories.

Matthew Sperry, private wealth partner at globall law firm Katten Muchin Rosenman LLP, said: “Labour seems to have largely adopted what they had proposed previously.  This includes no grandfathering for trusts that were IHT protected, meaning foreigners resident in the UK for 10 years will be fully exposed to IHT – including those that had settled trusts that were IHT exempt under current law. 

“I fully expect that this news will hasten the exit for many non-doms that were advised to postpone any moves until after this Budget.  Labour has ignored those that have warned that this move would eviscerate the non-dom tax base.”

He warned that the Labour plan makes the US more attractive for global ultra-high net worth wealth as pre-arrival trusts can be used to eliminate exposure to US estate tax, and US income and capital gains rates are lower than the UK.

He added: “As much as I love the UK, this places the US, Italy, Switzerland, the UAE and other global jurisdictions in a much stronger position in competing for UHNW wealth and investment in the coming years.”