Spring Budget 2024

7 March 2024

Jeremy Hunt has just delivered what is thought to be the last budget before the next general election. There was a combination of policies which had been widely trailed over the past week but also some surprises, which in the face of an impending election, is to be expected. 

Changes to non-dom:

The big news was the end of the current rules for non-doms. Some form of change was expected but what was announced was not the Italian style flat rate scheme many had suggested was coming. As always with Budget announcements, the devil is in the detail, so we will need to wait to see how the proposed changes translate into draft legislation, but the headlines are:

• The current remittance basis regime for non UK domiciliaries will be abolished with a move to a residence based system, removing the concept of domicile. 
• From April 2025, new arrivals will not pay income tax and capital gains tax on foreign income for the first 4 years of residence, without the need to keep the income/gains offshore. This is so long as they have not been resident in the previous 10 years. 

• There will be transitional rules for longer-term resident taxpayers who will lose access to the remittance basis from April 2025, including a 50% reduction in the tax charge on 2025/26 foreign income/gains, an option to rebase assets to April 2019 for CGT, and a 2 year window to remit foreign income/gains at a reduced tax rate of 12%.

• Another element of the proposed overhaul of the domicile rules are the rules around offshore trusts they create. From April 2025, the income and capital gains benefits that currently exist to limit the liability for tax on trust income and gains to the amount of distributions received will be removed, leaving the potential for all of the trust income and gains to be taxed.

• There was also a clear statement of intent to move IHT for non-doms to a residence based regime with IHT being due on worldwide assets after 10 years of tax residence (and for 10 years after leaving the UK), but this will be consulted on later in the year. 

• Overseas workday relief will still be available for the first 3 years of residence, but without the need to keep the foreign income outside the UK. 

Given that legislation bringing most of these proposals into effect will not be in place before the general election is called later this year, and we have a potential change of Government, it’s therefore difficult to tell at this point if these will ever come into force or if so in what form without the benefit of a crystal ball. It may therefore be worth waiting for further developments before taking any action.

In other news:

• Reduction in NICs of 2% for both  employees and self-employed individuals from 2024/25

• The top rate of CGT on residential property sales will be reduced from 28% to 24% for disposals from 6 April 2024; the basic 18% rate remains unchanged.

• High Income Child Benefit Charge – for 2024/25, the income threshold will raise from £50k to £60k, with the charge being the full amount of the allowance claimed when income reaches £80k (previously £60K).  The suggested intention is to move in the future to a household income basis for assessing the charge.

• The Furnished Holiday Letting (FHL) regime will be abolished from April 2025, bringing those properties into line with regular longer term lets.

• Consultation on a new UK ISA, with an additional £5k allowance, to promote investment in UK companies.