Analyses & Studies

End of Non-Dom Status: Impact on French Professionals in the UK

The UK's decision to abolish the non-domiciled (non-dom) tax regime from April 6, 2025, raises questions about its impact on French nationals working in the UK. This article explores potential consequences for Franco-British economic relations, considering the characteristics of French non-doms and the limited response seen to past reforms. While the evidence suggests the impact on highly mobile high skilled workers will be minimal, careful consideration needs to be given to ensuring the continued flow of the talent required for business growth.

Understanding Non-Dom Tax

The non-dom regime applies to certain individuals residing in the UK but considered domiciled for tax purposes elsewhere. Non-doms pay UK tax only on income earned within the UK, with foreign income and capital gains exempt unless brought into the UK ("remitted"). Most non-doms are high-earning professionals, with a significant portion working in the financial sector. Around 80% of non-doms have earnings from some kind of work (or pension income) as their main source of income.

French Connection

French citizens make up a substantial portion of EU non-doms in the UK, accounting for roughly 8% of all non-doms in 2018. France's geographical proximity and historical links mean a relatively large share of migrants are French. In addition, French migrants tend to be disproportionately top earners, particularly in finance. These factors make French non-doms a large group, and therefore the end of non-dom status might reasonably cause concern. However, two reasons suggest the impact is likely to be minimal:

• Most non-doms are working on short-term contracts

Migrants tend to be highly mobile, moving between countries for work. A quarter of new arrivals leave within a year, and this is true of non-doms. Many come to the UK explicitly for short-term work, while some end up settling and staying, many leave within a few years. French non-doms don't look different in this regard. The new regime that replaces the non-doms will cover those people who arrive to work in the UK for just a short time, potentially mitigating the impact on this group. From 6 April 2025 there will be a new 4-year foreign income and gains (FIG) regime in which qualifying individuals will not pay tax on FIG arising in the first 4 tax years after becoming UK tax resident and will be able to bring these funds to the UK free from any additional charges.

• Limited Response to Past Reforms

Previous reforms to the non-dom regime suggest that high-earning, work-based non-doms, like many French professionals, haven't significantly altered their behaviour in response to tax changes. The 2017 reforms removed non-dom status for those resident in the UK for 15 out of the previous 20 years and primarily impacted those with wealth sourced outside the UK. Various studies have shown that high-income earners continued working in the UK, simply paying the additional tax. While data specific to French nationals is limited, the overall trend across EU countries suggests a similar pattern. In short, people who were going to leave, left straightaway, and there was little response thereafter.

Although we may cautiously conclude the impact on highly mobile short-term workers will be minimal, the combined effects of Brexit and the pandemic make it difficult to isolate the precise future impact. It could discourage some highly skilled, highly mobile French professionals from coming to the UK. This could affect key sectors like finance, impacting the overall talent pool. Existing French non-doms with significant foreign wealth might choose to relocate to other jurisdictions with more favourable tax regimes. This could lead to a loss of valuable expertise and tax revenue for the UK. In light of these reforms, the French Chamber of Commerce must continue to make the case for initiatives that promote talent mobility.