Experts indicate a pronounced uptick in inquiries from NRIs residing in the UK as the government’s plan, slated to take effect in April of the following year, significantly revamps taxation for non-residents
The United Kingdom’s forthcoming alterations to its tax system, particularly concerning the overseas income of non-UK domiciled residents, have catalyzed a flurry of strategic moves among affluent non-resident Indians (NRIs) aiming to establish tax-efficient ownership structures in alternative jurisdictions. Initially reported by moneycontrol.com, experts indicate a pronounced uptick in inquiries from NRIs residing in the UK as the government’s plan, slated to take effect in April of the following year, significantly revamps taxation for non-residents.
Previously, non-domiciled individuals such as NRIs were taxed solely on their UK-based income. However, the proposed reduction of the exemption period from 15 years to merely four has thrown financial planning into disarray for many.
Consequently, NRIs are actively exploring avenues to shield income derived from their India-based assets from escalated taxation. Suraj Malik, managing partner of Legacy Growth, notes a trend among families holding non-UK situs assets to seek alternate jurisdictions for creating holding structures safeguarded from UK taxes under the impending regime. Contemplations include decentralizing control from UK-based beneficiaries through multi-layered entities or trusts, with destinations like Jersey, the UAE, or Singapore emerging as viable options.
Historically, the UK has been a magnet for wealthy Indians seeking global citizenship. However, the evolving tax landscape may alter this trend, potentially redirecting affluent individuals toward destinations offering more favorable tax regimes
Dubai, in particular, is gaining traction as a preferred global tax residency destination, especially for prospective NRIs and recent UK residents with limited residency duration. The allure stems from its minimal personal taxation and a lifestyle akin to other international financial hubs, positioning it attractively for those aiming to alleviate their tax burden.
Amit Singhania, founder of Areete Law Offices, observes that the proposed tax reforms in the UK might tilt the scales in favor of Dubai, given its zero personal tax rate, contrasting with potential rates as high as 40 to 45 percent for certain incomes under the new UK proposals.
Moreover, the ramifications extend to succession planning due to the UK’s estate tax, which contrasts sharply with India’s current exemption. Sandeep Jhunjhunwala, M&A tax partner at Nangia Andersen LLP, suggests that these changes may erode the UK’s appeal among prospective residents, with Dubai poised to emerge as a prominent alternative for the Indian diaspora seeking favorable tax conditions and financial opportunities.
Historically, the UK has been a magnet for wealthy Indians seeking global citizenship. However, the evolving tax landscape may alter this trend, potentially redirecting affluent individuals toward destinations offering more favorable tax regimes.
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