The chancellor Rachel Reeves is reportedly considering changes to inheritance tax on non-doms for assets held around the world, as pressure has ramped up from the City.
Before Labour came to power, the party claimed that the crackdown on non-dom trusts would bring in £430m each year, although the Office for Budget Responsibility (OBR) estimates following the Budget found that the tax would bring in half as much.
The changes has also led to a sharp slowdown in prime central London property market activity, with the Financial Times reporting that teh chancellor has now accepted that “tweaks” to current rules are needed.
As of April, global assets have been slapped with a 40% inheritance tax, which the FT claims is the aspect of the rule changes that has deterred non-doms.
The Treasury said: “The UK remains highly attractive. Our main capital gains tax rate is lower than any other G7 European country and our new residence-based regime is simpler and more attractive than the previous one, whilst it also addresses tax system unfairness so every long-term resident pays their taxes here.
“As the chancellor set out at Spring Statement, the government will continue to work with stakeholders to ensure the new regime is internationally competitive and continues to focus on attracting the best talent and investment to the UK.”
Becky Fatemi, executive partner at Sotheby’s International Realty UK, is among those to welcome rumour that the chancellor may reverse inheritance tax for non-doms.
“The rumour suggests a quiet admission: the government got it wrong. The current regime has driven wealth creators out of the UK, in many cases for good.
“Inheritance tax, more than any other policy change, was the nail in the coffin. It’s what tipped many non-doms over the edge. We’ve seen clients go to extraordinary lengths — restructuring, relocating, spending significant time and money — simply to avoid a punitive future for their estates. But tellingly, many didn’t sell their London homes. They held onto them, hoping the political mood music might change.
“If this rumoured U-turn materialises, it won’t reverse the exodus overnight, but it could stop the bleeding. It might convince some to keep a foothold in the UK — and even tempt a few to come back. It’s a small step, but a significant one pointing towards the bigger rethink that’s urgently needed: the UK’s broader tax stance on international wealth.
“Right now, what’s most damaging is the volatility. Constantly moving the goalposts doesn’t give investors confidence — it makes them look elsewhere. If the chancellor really wants to signal that Britain is open for business, we need more than whispers and policy tweaks. We need a stable, competitive tax environment that actively encourages international capital.
“Because let’s not forget: London still has unmatched global appeal. World-class schools, culture, art, architecture, and heritage — that doesn’t change. But unless the rules do, the wealth will continue to flow out, not in.”
Toby Downes of Haringtons UK believes that a U-turn on inheritance tax for non-doms would be a clear boost for the prime central London property market. A significant number of international homeowners have already left the UK in response to the changes — not because they wanted to, but because the tax implications made it unviable to stay. And yet, many haven’t sold. Instead, they’ve chosen to rent out their homes, keep them for occasional visits, or leave them for family to use. That suggests a key detail: they’re hoping to return.
“That’s why we haven’t seen a flood of top-end homes hit the market. These aren’t fire sales — they’re strategic pauses. If the rules are softened, we could see those owners quietly re-enter the fold. Some departures may be permanent, but for many, the door is still open.
“Reversing the IHT might not generate political fanfare domestically, but it could be the catalyst the market needs. It’s not just about property — it’s about people choosing to invest, live and spend in London again. Without that shift on inheritance tax, however, we risk watching more of them slip away — and they won’t all come back.”
Will Watson, head of the Buying Solution, added: “Reeves announcement gives a renewed optimism to the prime London market. This coupled with the feeling of unrest elsewhere such as the Middle East, and feeling that many other cities just cannot offer what London has are likely to halt decisions to relocate entirely while they wait and see.
“The changes have had a hugely negative impact in the short to medium term with a significant exodus from the London market. There is no assurance which way this will go, but for us this signals a window of opportunity ahead of the Autumn budget as a great window to buy well. As if non-dom taxes are then reduced at the October budget the buyers will return back quickly and with confidence.”
Prime London property values fall by as much as 60%
