Chancellor Rachel Reeves is rumoured to be considering changes to controversial inheritance tax (IHT) rules that would have affected wealthy individuals who have already been hit by the end of non-dom status.
The non-dom tax regime was scrapped in April, essentially meaning more overseas earnings for wealthy people living in the UK will eventually be taxed here.
The government has also said that overseas assets owned by those living in the UK will be included in a person's estate for inheritance tax purposes after a set period under the changes.
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The end of the non-dom tax regime has already prompted concerns about wealthy people leaving the country due to high taxes.
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Analysis by Henley & Partners already shows there was a net outflow of 10,800 high-net worth individuals from the UK in 2024.
MoneyWeek recently spoke to a millionaire who is leaving the UK because of the non-dom tax status abolishment.
Joshua Gerstler, chartered financial planner for The Orchard Practice, said: “Rachel Reeves needs to learn sooner rather than later that the more you tax the wealthy, the more likely they are to leave and the less well-off hard working Britons will be.”
But as concerns of a wealth exodus rise, Reeves is now reported to be planning to U-turn on changes to inheritance tax.
Will Rachel Reeves U-turn on non-dom inheritance tax changes?
Plans to end the non-dom tax regime were initially put forward by the the previous Tory government but chancellor Reeves has gone further since Labour swept to power.
The government’s measures also added that those resident in the UK for at least 10 years of the past 20 would be subject to inheritance tax on a worldwide basis.
But amid concerns of a wealth exodus, the Financial Times is now reporting that Reeves is considering reversing the IHT non-dom changes.
The rumours have been welcomed by advisers and estate agents working in London’s prime property market, where there are fears for house prices as wealthy international buyers may be steering clear.
Becky Fatemi, executive partner at Sotheby’s International Realty UK, said the rumour that the chancellor may reverse inheritance tax for non-doms finally suggests a quiet admission that the government got it wrong.
She said: “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.:
Fatemi said a U-turn won’t reverse the exodus overnight, “but it could stop the bleeding".
She added: “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.
If the chancellor really wants to signal that Britain is open for business, Fatemi said a stable, competitive tax environment that actively encourages international capital is needed.
She added: “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 property firm Haringtons UK, said 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.
He added: “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.”
He suggests that reversing the IHT change might not generate political fanfare domestically, but it could be the catalyst the market needs, adding: “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.”
A Treasury spokesperson said: “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.”
