UK Spring Budget 2024

The amendments to the complex non-dom rules arising from the UK Spring Budget 2024, while affecting some, may offer opportunities for others.  We await full details and consultation periods, but anyone who is non-domiciled or has established non-UK trusts should seek advice pre 5 April 2025, before the introduction of the new rules. 

Summary

Capital Gains Tax (CGT): The higher rate of CGT for residential property disposals will be reduced from 28% to 24% from 6 April 2024. The lower rate of 18% will remain in place for any gains that fall within an individual’s basic rate band.

Individual Savings Accounts (ISAs): A new ISA will be introduced with an allowance of up to £5,000 per annum, which will encourage investment in UK incorporated businesses listed or admitted to trading on a UK recognised stock exchange.  There will be a consultation on this which will run to 6 June 2024.

Furnished Holiday Lettings (FHL):  Currently FHL are treated as a trade for tax purposes, which allows for special treatment for both CGT and IHT, in addition to the availability of losses and deduction of finance costs for income tax purposes.  It is expected that this treatment will be abolished from April 2025, with anti-forestalling rules to apply from 6 March 2024 to prevent tax advantages being obtained in relation to CGT.  It is expected that the new rules will bring these properties inline with all other residential property tax rules.

Extension of Agricultural Property Relief (APR):  Following a consultation, the extension of IHT APR to non-agricultural environment land will be introduced from 6 April 2025.  The land will need to meet certain criteria such as having been agricultural land for 2 years prior to the change of use, and the land is managed under an environmental agreement with, or on behalf of, the UK Government, public bodies, and other approved bodies.  

Child benefit:  The High Income Child Benefit Charge (HICBC) threshold will be increased from £50,000 to £60,000 from April 2024.  In addition, the rate at which HICBC will be withdrawn will be increased from £60,000 to £80,000.  There will also be a consultation on administering the HICBC based on household income rather than individual income.

Non-Dom Changes

From 6 April 2025 the remittance basis will be abolished and replaced with a new 4-year regime whereby individuals who become UK resident (after 10 years of non-residence), will not pay tax on their non-UK income / gains (‘FIG’) for the first 4 years, even if that FIG is brought to the UK. This is therefore a 4-year total exemption, rather than remittance basis regime. 

Whilst the remittance basis is being abolished from 6 April 2025, any pre-2025 FIG will still be taxable if it is remitted to the UK after that date. 

Non-doms will be incentivised to remit historical FIG via what is called a Temporary Repatriation Facility. This will allow remittances made in the years 25/26 and 26/27 to be taxed at 12%. After those years (i.e. 27/28 onwards) any remittances would be taxed at normal rates (up to 45%).

There will be a further capital gains tax rebasing such that from 6 April 2025 the disposal of any assets held at 5 April 2019 will be calculated using the 5 April 2019 market value instead of actual cost. This is only available to individuals who are not already deemed domiciled as at 5 April 2025.

There will be a transitional relief for those moving from the remittance basis to the new regime in 2025. The relief means that instead of being taxed on 100% of foreign income in 25/26 they will only pay tax on 50% of it.

‘Protected Trust’ status – whereby foreign income / gains arising in non-UK settlor interested trusts are only taxed when distributed to beneficiaries – will be removed from 6 April 2025. Instead from that date income and gains arising in the trust will be taxable on the settlor as it arises.

There will be a consultation on changing the IHT rules from being based on domicile to being based on residence. The proposal is that worldwide assets will be within the scope of IHT once an individual has been UK resident for 10 years (with a provision to keep them in scope of IHT for 10 years after leaving the UK). Any ‘excluded property’ trusts settled prior to 6 April 2025 would remain outside the IHT net as they are now.