In April 2025, the UK made its biggest change to personal tax rules in a generation. The government ended "non-dom" status, closing a system that had lasted for centuries, and replaced it with a tax regime based on where you live instead of where you are domiciled.

Just over a year later, debates about whether the change worked are still going strong. Most of the discussion centres on whether wealthy people are leaving the UK.

That debate matters, but it doesn't affect most readers. Here is a clear look at what has actually changed, what the evidence shows so far, and, beyond the headlines about billionaires, what the new residence-based system means for ordinary British expats and people returning to the UK.

What actually changed

For over two hundred years, "non-domiciled" residents could live in the UK while keeping their foreign income and gains largely outside the reach of UK tax. That ended on 6 April 2025, and a residence-based system replaced it.

Here are three key changes.

The remittance basis is gone

Now, a four-year Foreign Income and Gains (FIG) regime applies. People who become UK residents after at least ten years of living abroad can claim full relief on their foreign income and gains for their first four years. After that, their worldwide income is taxed like everyone else's.

Inheritance tax became residence-based

Instead of depending on domicile, IHT now depends on long-term residence. In general, once you have been a UK resident for 10 of the last 20 years, you are a "long-term resident", and your worldwide estate is subject to UK inheritance tax. A "tail" also keeps you in scope for a period after you leave.

The Temporary Repatriation Facility (TRF)

A TRF lets former non-doms bring previously untaxed foreign income and gains into the UK at a reduced rate for a limited window, rather than the full rate that would otherwise apply.

Taken together, these changes are a fundamental shift. The question is no longer "where are you domiciled?" but "how long have you been resident?" This is much harder to plan around.

What's happened: the UK wealth exodus debate

The reform was expected to bring in about £2.6 billion a year. Whether it will really raise that much is still up for debate.

Some evidence shows that wealthy residents have left. The 2026 Sunday Times Rich List said about one in six people from two years before were no longer UK residents. Wealth trackers list Italy, Switzerland, the UAE, and Monaco as the main destinations.

A former Treasury economist estimated that at least 10% of non-doms had already left the UK. The Office for Budget Responsibility (OBR) expected about 1,200 to leave when the new rules began. Recent HMRC figures show a net drop of 1,200 wealthy non-dom taxpayers, matching the OBR’s forecast.

Critics say the exodus is happening faster than expected, mainly because a small group of very wealthy people pay much of the tax. Losing even a few of them could cancel out the gains.

On the other hand, research behind the policy said the tax break only helped a small group. Taking it away was expected to raise a lot of money, with only a few people leaving. This suggests that warnings about people leaving are exaggerated, and most affected people stay because their lives, businesses, and families are in the UK.

The truth is, a year later, it is still too soon to know for sure. Most real data will not show up until the 2027 self-assessment returns, which will be the first to cover a full year of the new system. An HMRC review should also give more details. Anyone who says they know for sure what has happened is getting ahead of the evidence.

What the headlines miss: it's really about capital taxes

An important point often gets overlooked. Studies show that wealthy people usually move not because of income tax, but because of capital taxes. These include inheritance tax, capital gains tax, and the risk that all your worldwide wealth could be taxed for years.

The main worry is not "my salary is taxed" but "my global estate could be taxed forever."

That is why the IHT change, which taxes your worldwide estate based on long-term residence and follows you even after you leave, may have a bigger impact on migration decisions than income tax. That is also why knowing your residence status now matters more than the old, unclear idea of domicile ever did.

What it means for ordinary expats

This part matters for everyone, not just those on the Rich List. The same residence-based system affects ordinary British expats and people returning to the UK.

Here are some important points to consider.

If you're thinking of moving back

The four-year FIG regime is a real opportunity that is often overlooked. If you are a Brit returning after ten years or more abroad, you can bring foreign income and gains home tax-free for four years. Careful planning can pay off, as we explain in our moving back to the UK article.

If you're building an estate abroad

Residence-based IHT rules determine whether your worldwide assets are subject to UK tax, and for how long after you leave. This is the main focus of our guide to UK inheritance tax for expats, and it is now based on residence, not domicile.

Residence is now the master switch

Your residence status decides your income tax, your gains, and your estate exposure. This makes the Statutory Residence Test the most important thing for an expat to understand.

In other words, a reform aimed at the global super-rich has quietly made everyone's residence position more important, including yours.

Why it's still worth watching

There is another reason not to see any of this as final. With an HMRC review happening and the Autumn Budget on 28 October, more changes are possible.

Some analysts want the government to make short-term changes to boost revenue and competitiveness, while others think the policy should be left alone for now. Either way, this remains an active area of tax law, so any decisions made now should account for the fact that the details could still change.

None of this is a reason to panic. For most expats, it is a reason to plan rather than react. The new residence-based system means it is more important than ever to get proper advice on your own situation, including when to move, how your estate is set up, and how exposed your wealth is to changes in any one country.

If you want to understand how the residence-based system affects you—whether you are settling abroad, building an estate, or planning a return—talk to Holborn Assets.