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2024 UK Autumn Budget Announcements

Jane Cooper 31 October, 2024

The Chancellor of the Exchequer, Rachel Reeves, announced her first Budget under the new Labour Government on 30 October 2024.

Please see our synopsis below on the main issues affecting our clients.

Main Points                                      

  1. Non-domiciled regime abolished and replaced with a residency-based system
  2. IHT residency-based test for non-UK domiciled
  3. Offshore trusts no longer excluded property
  4. Pensions now fall within UK IHT
  5. CGT rates increasing to 18% and 24%
  6. Stamp Duty Land Tax rate for additional dwellings increasing to 5%
  7. Employers’ national insurance rates increasing

Key Measures Announced

Non-UK Domiciled Regime

  • From 6 April 2025, the non-UK domiciled regime will end and be replaced with a tax residency-based system. All UK residents will be taxed on their worldwide income and gains. The remittance basis of taxation, which allowed non-UK domiciled individuals to avoid UK tax on foreign income and gains not brought into the UK, will no longer apply. The last year for which the remittance basis can be claimed will be the 2024/25 tax year.
  • Foreign Income and Gains Regime
    • New arrivals to the UK will benefit from a grace period where eligible Foreign Income and Gains (FIG) will be fully exempt from UK tax during their first four years of UK tax residence. In order to apply, the individual must have been non-UK tax resident for a consecutive 10 years, before UK residence. This also includes UK nationals and UK domiciles who previously were not eligible for the remittance basis.
    • Eligibility will be determined by the UK Statutory Residence Test. Treaty tie-breaker residence under a Double Taxation Agreement (DTA) will not be accounted for when determining eligibility. Note that UK split year treatment will count as a full year of UK tax residence.
    • Individuals will be required to quantify the amount of income and gains for which the relief applies and make a claim on their Self-Assessment tax return for the exemption to apply. However, making the claim will result in a loss of the UK personal allowance and the Capital Gains Tax (CGT) annual exempt amount. Individuals do not need to make the claim every year, but only a maximum of four consecutive years from UK tax residence will apply.
    • Note that not all types of foreign income and gains will be relievable under the 4-year FIG regime.
  • Temporary Repatriation Facility
    • Individuals who remit their FIG to the UK, which arose in earlier periods and were not taxed in previous years following a claim for the remittance basis, will be taxed at 12% in the 2025/26 and 2026/27 tax years. For 2027/28 the rate will increase to 15%. The planned 50% tax reduction on FIG during the first year has been removed.
  • Overseas Workday Relief
    • From 6 April 2025, OWR will continue to apply but will be based on the employee’s residence and not domicile status. The OWR will be available for a maximum of four years.
    • The amount of OWR available will be taxed at the lower of 30% of qualifying employment income and £300,000 per tax year.
    • The election must be made on the Self-Assessment tax return and will result in a loss of the personal allowance and CGT annual exempt amount.
  • Capital Gains Tax Rebasing
    • Individuals who have claimed the remittance basis, will be able to rebase their foreign assets to the market value as at 5 April 2017, but various conditions will apply.

Inheritance Tax

  • The UK government also replaces the domicile-based regime to a residence-based system.
  • From 6 April 2025, non-UK assets will be within the scope of IHT if the individual is a long-term resident i.e. has been resident in the UK for at least 10 of the previous 20 tax years immediately preceding the tax year the chargeable event occurred.
  • Individuals who have been long term residents and subsequently become non-UK resident will remain within the scope of IHT. However, the time they remain in scope will be shortened. For example, those who are resident between 10 to 13 years will remain within the IHT scope for 3 years. The number of years will increase by one tax year for each individual year of residence.
  • This test will be reset if the individual has a period of 10 consecutive years of non-UK residence, even if they return to the UK.
  • The £325,000 nil rate band is frozen until April 2030.
  • 100% rate of relief will be available for the first £1 million of combined agricultural and business assets. Above £1m will have relief at 50%. The government will also reduce the rate of business property relief to 50% for shares not listed on a recognised stock exchange, such as AIM.
  • Offshore trusts will no longer be classed as excluded property if the settlor is a UK tax resident.
  • From April 2027 most unused pension savings will form part of an individual’s estate for UK IHT purposes.

Capital Gains Tax

  • The lower rate of UK CGT of 10% will be increased to 18%, whereas the 20% rate will be increased to 24%, effective from 30 October 2024.
  • Business asset disposal relief and investor relief will rise from 10% to 14% from 6 April 2025 and again to 18% from 6 April 2026.
  • For carried interest the CGT rate will increase to 32% from 6 April 2025. From 6 April 2026 carried interest will be subject to income tax and Class 4 NIC.

Stamp Duty Land Tax

  • SDLT rates for additional dwellings will be increased from 2% to 5% from 31 October 2024.

Income Tax and National Insurance Contribution

  • The rates of income tax and individuals NIC will remain until April 2028, where it is expected the rates will be increased in line with inflation.

NIC Increase for Employers

  • From 6 April 2025, the rate of employer NIC will increase to 15% from 13.8%.
  • The threshold where the employers start to pay NIC will be reduced from £9,100 per year to £5,000 per year per employee.

 

If you would like to discuss the above further, please speak to your trusted GM Tax advisor.