United Kingdom: Reform of the Inheritance Tax, “Non-Dom” Regime, and Tax Opportunities in Italy for New Residents

Significant developments have taken place in the United Kingdom with the introduction of the UK Finance Bill 2025, which includes one of the most notable reforms in the area of Inheritance Tax (IHT).

The United Kingdom has abolished the long-standing tax regime for non-domiciled residents (“non-doms”), replacing it with a system based exclusively on tax residency.

This change means that all UK tax residents will now be subject to taxation on their worldwide income and gains, subject only to limited reliefs available for new residents, and only for a transitional period during the initial years of residency.

The new legislation also introduced amendments to the Inheritance Tax (IHT) regime.Starting from 6 April 2025, individuals who have been  residents in United Kingdom for at least 10 of the past 20 tax years will be subject to IHT on their worldwide estate, not just on UK-based assets.Inheritance Tax, levied at a rate of 40%, will therefore apply to assets located anywhere in the world, not solely to those situated in the UK.

Understandably, the imposition of IHT at a rate of 40% or higher on the global estate of a deceased person has led many former beneficiaries of the non-dom regime to consider relocating their tax residence to other jurisdictions.Among the attractive alternatives is Italy, which positions itself as a favorable tax jurisdiction for high-net-worth individuals.

Italy’s special tax regime for new residents, introduced by the 2017 Budget Law and subsequently amended, offers a flat tax of €200,000 per annum on all foreign-source income, available to individuals who transfer their tax residence to Italy and who have not been tax resident in Italy for at least nine of the ten previous tax years.

The regime can be maintained for up to 15 years and may be extended to family members, with an additional flat tax of €25,000 per family member.

Further benefits under the Italian regime include:

• Exemption from Inheritance and gift tax on assets located abroad;

• Exemption from Italian wealth taxes on foreign real estate and financial investments;

• Exemption from foreign asset reporting obligations under Italian tax law.

  
  

In conclusion, Italy presents itself as a highly attractive and tax-efficient alternative, not only for high-income individuals, but also—as we will explore in the next article—for those with more modest financial means.

Milan, 19th May 2025

Avv. Giovanni Babino