The UK press is increasingly focused on the growing exodus of high-net worth individuals from the country, with some reports suggesting that "one millionaire left Britain every 45 minutes" following the 2024 election. The Labour Party was elected on a platform of tax fairness, and promised to shift the tax burden away from "working people" and toward the wealthy. This has set significant tax changes in motion.
One of the most significant policy changes was the abolition of the non-domicile regime from 6 April 2025. Previously, non-UK domiciled individuals could elect to pay tax on the "remittance basis," whereby they were not taxed on non-UK income or gains provided monies weren’t remitted to the UK. The non-domicile status was long criticized for favoring individuals with significant overseas wealth. On the other hand, it was also enjoyed by many newcomers to the UK, and perhaps enticed individuals to move to the UK at least for a certain period of time.
Now, in place of the non-domicile status, newcomers to the UK will enjoy a UK tax exemption on all foreign income and gains for their first four years of UK residency. From year five, they will be taxed on all income and gains in exactly the same way as standard UK taxpayers.
The UK economy reportedly contracted in April 2025 by 0.3%, perhaps as a response to feared further tax rises and economic uncertainty. Opinion in the UK Jewish community on the UK economy, expected higher taxes, and rising antisemitism, paints a bleak picture.
Israel: Home sweet home
Figures from Israel’s Central Bureau of Statistics show that 520 people immigrated to Israel from the UK between January and November 2024, representing a 46% year-on-year increase. Personal, ideological and family motivations remain strong drivers for making aliyah. We are now seeing a clear rise in those re-evaluating their residence for financial and tax reasons.
This shift has triggered a wave of inquiries and planning activity. Non-domiciled people and internationally mobile clients - particularly those with strong ties to Israel or business interests in the region - are reassessing their options.
There are some similarities between the original non-UK domicile status and the 10-year tax exemption for new Israeli residents and some returning residents. Israel’s 10-year tax exemption for overseas income and gains remains one of its most compelling incentives for new residents.
The tax benefits are relevant for:
- New residents in Israel.
- Returning residents to Israel after over ten consecutive years abroad, or
- Residents who returned to Israel between 2007 and 2009 after at least five years abroad.
Recent amendments to the law eliminate the exemption from reporting to the Israel Tax Authority (for those arriving from 1 January 2026), but the core tax benefit remains intact.
This means that new residents will have to disclose their global income, but will not be taxed on it for ten years. Given the global shift toward transparency under the OECD's Common Reporting Standard (CRS), this reporting requirement aligns with international norms. It is also most likely that the information to be disclosed is already available to the Israel Tax Authority. However, it may increase scrutiny and the potential for disputes, especially for individuals with complex asset structures or foreign corporate interests.
Disputes are likely to arise in more complex cases where taxpayers are owners of foreign companies or generate income from more than one location. This may encourage people to aim to become Israeli tax resident before 1 January 2026.
Inheritance tax
Israel does not impose inheritance tax, in stark contrast to the UK, where inheritance tax is charged at 40% on the value of a deceased person’s estate above the available nil-rate band, including worldwide assets for most taxpayers. It is a tax on capital that has already been subject to taxes during the individual’s lifetime making it extremely unpopular. This is a significant consideration for wealthy families with cross-border estates or succession planning concerns. There are also rumors of the UK possibly bringing in a wealth tax, further worrying wealthy individuals.
Israel's proposed residency reform: a new layer of complexity
As it stands, Israeli tax residency is determined on the basis of the location of the taxpayer’s "center of life." The current rules state that an individual is Israeli tax resident if they are present in Israel in a tax year for 183 days, or more than 30 days in a tax year and a total of 425 days or more on aggregate for the tax year in question and the two previous tax years. Whilst the number of days spent in Israel is certainly a factor, the "center of life" test is the overriding criterion in ascertaining tax residency.
The center of life test considers factors such as the residency of the taxpayer’s family, the location of their permanent home, their place of work, as well as other social and economic ties. Most jurisdictions focus on day-count, but the second indicator of residency considers ties to countries. Analyzing ties to a country can be subjective, especially given the world of global mobility we live in. Remote working, international commuting and digital advances have significantly blurred the lines between where a person lives and where they earn their income. This fluidity makes the traditional tests for determining tax residence-particularly those based on subjective personal and economic ties-increasingly complex and open to challenge.
The Israel Tax Authority has proposed new legislation to redefine Israeli tax residency by shifting to a conclusive rule based solely on day-count. The proposed rules consist of calculating a weighted-average-days-of-stay by reviewing the days spent in Israel in the current tax year, as well as the two tax years before and after. This would provide the Israel Tax Authority with better information to determine the taxpayer’s lifestyle and time spent in Israel. However, blanket rules can inadvertently lead to unfair or unintended outcomes for individuals whose personal and economic ties do not align with their physical presence. The proposed new rules would mean that:
- Anyone who spends 183 days in Israel over three years and 75 days or more in a single tax year will be classified as an Israeli tax resident.
- To be conclusively considered non-resident in Israel, one must spend fewer than 75 days in Israel during a tax year, and no more than 110 weighted days over 3 years.
- If a person’s spouse is an Israeli resident, the residency thresholds for that person are even stricter. As few as 30 days in a year may trigger Israeli residency.
These rules aim to create clarity, but many individuals may inadvertently and unintentionally become Israeli tax resident as a result of frequent visits. Of course, double tax treaties also need to be considered, as well as the relevant tie-breaker rules.
Home is where the heart is?
Wealthy taxpayers in the UK, particularly those who were non-UK domiciled, are reconsidering their options. Israel’s generous tax exemptions for new residents certainly make it a compelling alternative.
Claire Shelemay, BFP FCA, is the founder and CEO of CrownStone Consulting, a UK tax boutique in Tel Aviv focused on UK tax advisory.
Published by Globes, Israel business news - en.globes.co.il - on July 13, 2025.
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