A Currently, non-domiciled UK residents only pay UK tax on their UK income. Anything earned abroad is taxed in that country, unless it is brought to the UK.
Q That does not sound unreasonable. Why is it being changed?
A The problem is that most British citizens living here do pay UK tax on their overseas income. There are some offsets to make sure they do not pay tax twice on the same income, but the effect of non-dom rules is that some foreigners pay less than Brits, living in the same place.
Q What do the different parties want to do about it?
A In 2008 Labour looked at scrapping the non-dom rules, but kept it for fear of driving rich foreigners away. Instead, a levy was introduced to charge non-doms resident in the UK for more than seven years £30,000 per year. The Tories looked at this and came to the same conclusion, hiking the rate of the levy.
Q What has changed now?
A In short, the election. Labour is fighting on grounds of living standards and fairness. Telling rich foreigners to pay more tax chimes with that. Instead of paying a levy, they will have to pay more tax. If the Conservatives oppose the change, it makes them look like they are on the side of the global rich.
Q So what effect will these changes have?
A Ed Miliband hopes it will raise hundreds of millions of pounds from a few thousand rich folk. However, they might just move to another country, which could reduce the government’s tax take.