Jeremy Hunt is considering ending or reducing “non-dom” tax breaks that allow wealthy individuals to live in the UK while their wealth is considered as residing overseas.
Sky News understands the measure is on a list of potential revenue raising measures being assessed ahead of next week’s budget, and could be enacted to give the chancellor room to cut universal taxes.
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The move, first reported by the Financial Times, could raise more than £3bn for the exchequer and would be politically eye-catching given Mr Hunt and successive Conservative governments have resisted calls to abandon it – arguing it makes the UK more attractive to foreign wealth creators.
It is also personally sensitive for the prime minister, whose wife Akshata Murty, daughter of the billionaire founder of the Indian software giant Infosys, previously benefited from non-dom status.
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Image: Akshata Murty. Pic. ReutersWhat does ‘non-dom’ mean?
More on Budget Related Topics: BudgetTax“Non-dom” is short for “non-domiciled individual” and refers specifically to the tax status of a person who is a UK resident but whose permanent home is abroad.
Non-doms only have to pay tax on money earned in the UK, while their overseas income and wealth are not subject to UK tax – and they can benefit from the status for up to 15 years.
AdvertisementThis allows wealthy individuals to make significant and entirely legal tax savings if they choose to be domiciled for tax purposes in a lower-tax jurisdiction.
Labour has long supported ditching non-dom status and has proposed cutting the duration of benefits to just four years in a concession to what they call genuinely temporary UK residents.
1:15 ‘We’ll only cut taxes in a responsible way’Tories constrained by their own rules
That similar measures are now being considered by Mr Hunt demonstrates both the tightness of the public finances, and the political imperatives of an election year budget.
Mr Hunt is attempting to find money to fund personal tax cuts he and the prime minister believe are potential vote winners, but is constrained by his own fiscal rules, an arbitrary set of restraints intended to demonstrate responsible economic management.
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Tap here to followThese require that debt falls as a proportion of GDP in the fifth year of economic forecast prepared by the Office for Budget Responsibility (OBR).
These forecasts include a figure for headroom, the amount of “spare” cash notionally available to stay within the rules, and this effectively sets the chancellor’s room for manoeuvre.
3:09 What is fiscal headroom?The OBR prepares multiple forecasts in the run up to a budget, the most recent of which was delivered on Wednesday with the final version due to be handed over on Friday.
Other measures reportedly under consideration are a tax on vapes and cuts to departmental spending, though many economists believe these are already inevitable on the government’s current economic plans.
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Adopting a popular Labour proposal that affects only the very richest would create a little more headroom and little controversy other than the charge of hypocrisy, but it might be a headache for the Opposition, who have said they will stick to the same fiscal rules.
With one of their few distinct revenue sources already used up, Conservative strategists believe Keir Starmer and Rachel Reeves would be forced to explain how they will raise money already committed to spending plans without raising the taxes Mr Hunt hopes to cut.
The Treasury declined to comment.