Labour plans to scrap non-dom tax breaks would raise about a billion pounds less than the £3.2bn previously claimed, under an option being considered to allow a four-year grace period for those with the status.
Research suggesting that scrapping the breaks could raise £3.2bn a year was cited by Labour when it announced the plans in 2022 to scrap rules allowing some wealthy people to avoid tax on foreign earnings if they have lived in the UK for less than 14 years.
The shadow chancellor, Rachel Reeves, has said abolishing the tax break in full would raise that amount each year and that Labour would use the money to expand the NHS workforce.
However, the party is also considering new regimes for temporary residents. One option under consideration is for individuals to be be able live as non-domiciles in the UK for four years before they pay the full UK tax, it is now understood.
“We’ve actually been fairly conservative, with a small c, in terms of how much we think it will raise,” Wes Streeting told LBC on Thursday in relation to the overall policy. “We put the number [at] about £2bn; £1.6bn will go to the NHS, the rest will go to primary school breakfast clubs,” the shadow health secretary said.
A Labour spokesperson said on Friday: “We have always been clear that we will scrap the non-dom rules, bringing in a modern scheme for people who are genuinely living in the UK for short periods.”
But the party came under attack both from the Conservatives and from activists on its left over the potentially revised policy.
“Full abolition of the non-dom tax status is a common sense, popular policy,” said Hilary Schan, the co-chair of Momentum, the leftwing campaign group. “So it beggars belief that the Labour leadership is watering down an already weak commitment on non-doms, and sacrificing much-needed funds for Britain’s broken public services in the process.”
The Times quoted a Treasury source as suggesting that Labour had staged a climbdown that could cast other spending plans into doubt. Labour has rejected this.
The policy to scrap the break – which has been used by Rishi Sunak’s wife to save paying millions in UK tax – is one of the main planks of Labour’s platform for how it proposes to fund planned service improvements.
Reacting this week to the latest NHS waiting list figures, Streeting reiterated that a Labour government would provide 2m more operations and appointments a year to cut waiting lists, paid for by abolishing the non-dom tax status.
Pledging in April 2022 to abolish the break, Reeves said Labour was sending a clear message to the global super-rich: “If you make your home in Britain you should pay tax here – on all of your income.”
