UK: Non-Dom Tax Reform

How Malta benefits and why you should consider relocating to Malta

The UK previously had a very business-friendly tax system. From 6 April 2025, the UK's non-dom tax system was abolished. The reform of this tax system means that the tax benefits associated with non-dom status will also be abolished. Many entrepreneurs who have utilised this non-dom status are taking flight to protect themselves from taxation of their foreign income in the UK. The first port of call is the small island state of Malta. English as an official language, sun, sea, business approachability and good flight connections to almost every European capital.

I. Non-dom status
The term "non-dom" (short for "resident, but non-domiciled") refers to a special tax status that is provided in some countries for foreign persons who live in a country but do not establish a permanent tax centre there. Permanent in this special tax context does not mean that you are not allowed to have your centre of life in the country permanently, but that you intend to move away again in the future. However, it is not specified when this move should take place. If a person fulfils the requirements for obtaining this status, they can benefit from tax advantages. This regulation was therefore primarily utilised by wealthy private individuals or entrepreneurs who receive income from foreign countries. The non-dom status allowed them to exclude their foreign income and capital gains (worldwide income) from UK taxation, as long as these funds were not imported into the country. In short, income of any kind that was earned outside the UK and not transferred to the UK was not subject to the UK tax system and could be taxed in countries with a lower tax burden.

II. What impact will the tax reform have?
With the abolition of the non-dom tax system, a purely residence-based tax system will be introduced in which the tax liability on worldwide income will be established from the first day of tax residence in the UK. 

An exception applies to the ‘transitional rules’, the so-called FIG regime (Foreign Income and Gains), which was introduced on 6 April 2025. This means that tax on foreign income and gains is not payable for the first four years of tax residency in the UK. After this period, the tax liability described above will apply. However, this regulation only applies to persons who have established their residence in the United Kingdom after the effective date of the introduction of the FIG regime. 

However, if you are already resident in the UK or if you establish new residence in the UK, but have been residing in the UK during the last 10 years, you cannot make use of this transitional arrangement. 

If you still do not wish to leave the UK, you may be eligible for rebasing and TRF (defined below).

• Rebasing (capital gains tax rebasing): This involves existing foreign assets such as shares or real estate that were acquired before 5 April 2017 and are sold after the cut-off date of 6 April 2025 being reset to their market value on 5 April 2017 for tax purposes. The following example is intended to illustrate the tax savings here: 

1. you purchased shares worth £100,000 in 2010. 
2. the value of the shares is valued at £200,000 on 5 April 2017
3. you sell the shares for £300,000 in July 2025

If rebasing is not applied, you would have to pay UK tax on the increase in value of £200,000 (£300,000 - £100,000).

With the rebasing option, you only have to pay tax on the difference between the increase in value and the sale proceeds of £100,000 (£300,000 - £200,000). This offers a significant tax advantage. 

• Temporary Repatriation Facility (TRF): This allows existing untaxed income or gains abroad to be transferred to the UK at a lump sum tax rate of 12% (later 15% if transferred in 2027-2028).

The two variants clearly show that the legislator in the UK wants to completely abolish the status of untaxed global income and merely offer tax relief and replace the previously existing complete tax exemption.

III. How can you protect your assets?
Despite attempts to persuade business owners and high net worth individuals to accept the tax policy, the UK Treasury has seen a significant outflow of capital and loss of sales of luxury property up to April 2025.

If you are unable or unwilling to take advantage of the transitional provisions of the FIG regime outlined above, you have the option of relocating to another country in order to escape the tax disadvantages.

MALTA - An interesting alternative 
Malta could be an attractive destination for you, as the non-dom status first established in the UK continues to exist in Malta in its current form. 

The following points also speak in favour of Malta:

Worldwide income remains tax-free
Persons with non-dom status in Malta are exempt from Maltese income tax on foreign income as long as it is not remitted (i.e. imported) into Malta. This includes income from dividends, interest and capital gains from abroad.

Favourable corporate taxation
Malta also offers a consolidated corporate tax rate of 5%, provided you set up a fiscal unit consisting of a parent company (holding) and at least one subsidiary (trading) for your business activities. This makes Malta an attractive location for holding companies and international business activities, especially within the EU. 

No inheritance or gift tax
Malta does not levy inheritance or gift tax, which makes non-dom status particularly attractive for estate planning and wealth transfer.

We will be happy to assist you in achieving non-dom status in Malta. This requires the following conditions in particular:

- Proof of valid residence in Malta
- Fulfilment of the minimum residence requirements
- Proof of sufficient financial resources
- Compliance with Maltese tax and reporting obligations
- Notarised documentation of the subsequent intention to leave

Contact the Dr. Kresse International team directly using our contact form.

Co-authored by Dipl.-Jur. Pawel Szczepanik, LL.B.