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A looming shift in British tax policy threatens to disrupt the financial landscape for non-resident Indians (NRIs), recent migrants, and families eyeing the UK as their new home. Expected to kick in by April 2025, the new tax regime spells out increased tax burdens and necessitates meticulous financial planning, potentially dimming the allure of the UK for prospective migrants.
Under the current tax setup, NRIs enjoy favorable treatment whereby their Indian income and capital gains remain untaxed unless brought into the UK. However, the proposed changes will drastically alter this scenario. New arrivals will only benefit from tax exemptions on foreign income for the initial four years upon residency, thereafter facing taxation on worldwide income, including earnings from India such as rent, bank deposits, and stocks. NRIs who have recently migrated may still claim relief on foreign income for a limited period.
For existing and prospective Indian families considering migration to the UK, careful planning becomes imperative. While some may opt to delay relocation in anticipation of potential policy changes following the next UK election, others must assess the impact on various income streams and explore alternative jurisdictions offering similar tax benefits.
The proposed changes also necessitate adjustments for wealthy NRI families with assets held in offshore trusts.
However, the shift towards taxing global income raises questions about the UK’s attractiveness for migrants. While the non-domiciled regime has historically drawn wealthy Indians due to tax advantages, the shortened exemption period may erode the UK’s appeal compared to countries with more lenient tax regimes.
Nevertheless, the proposed changes reflect broader global trends towards reducing tax evasion and ensuring fair taxation. Kunal Shah from BDO India emphasizes the shift towards preventing double taxation, signaling a broader paradigm shift in tax policy worldwide.
