An interesting budget that does have some implications for non UK residents, particularly those that own UK property. Furnished holiday let rules are being abolished which will mean the 10% business asset disposal relief will be removed and normal CGT will apply but there has been a reduction in CGT for residential property sales. Also what can be expensed will be reduced giving rise to more gains from rental incomes.
You should consider the implications of this if you plan to dispose of a UK property in the coming years. That said UK property does allow you to use your personal allowance x2 if joint owned so carful thought needed.
Also for those who have been in France for a long time and have changed their domicile of origin that return to UK assets overseas may need to be restructured or changed.
For pensions it is unlikely anyone will be adding to this from overseas but the focus of tax relief will be centred to encourage investment into UK markets/assets. Also there may be larger pooled investment pension funds that allow better growth but may be limited to focusing on investment into the UK economy. This is something that is working well in Australia so may be a positive move. It raises concerns over diversification of portfolios but the potential for lower charges and more return for risk taken. Most UK pensions are in with profits or smoothed funds that donāt perform in line with everyoneās attitude to investment risk so reviewing this with an adviser could be beneficial.
More detail belowā¦
Changes to UK resident / non dom rules:
Widely expected reforms to the UK resident / non domiciled rules announced for income tax and CGT. Future changes to IHT liabilities for non doms, post April 2025, will be a game changer and perhaps introduce a huge planning requirement over the coming 12 months:
ā¢ The Res/Non Dom rules announced are income tax and CGT related
o Currently, for the first 7 years on UK residency, a non dom can claim remittance basis of taxation
o This means tax can be avoided on non UK income and gains unless remitted to the UK
o Even if remitted many years later, it would be taxed on remittance if income or gain was generated whilst claiming the remittance basis of taxation
o After 7 years, and up to 12 years, it is possible to continue on the remittance basis, subject to a Ā£30,000 levy
o After 12 years, and up to 15 years, it is possible to continue on the remittance basis, subject to a Ā£60,000 levy
o After 15 years, the benefit of the remittance basis of taxation is lost
ā¢ From April 2025, these rules will be replaced by a residency basis of taxation
o For the first 4 years of UK residency, foreign income and gains will not be taxed in the UK, provided the individual has been non-tax resident for the previous 10 years
ļ§ This will be the case whether remitted to the UK or left abroad
o After 4 years, foreign income and gains will be taxed in the UK in the hands of a UK resident non dom, irrespective of whether it is remitted or not
ļ§ Double taxation treaties will prevent tax in both the country it arises and the UK
o Non Doms already in the UK on the current system will have some transitional relief including:
ļ§ an option to rebase the value of capital assets to 5 April 2019
ļ§ a 50% exemption for the taxation of foreign income for the first year of the new regime (2025-26)
o In addition, Non Doms already in the UK on the current system will have a 2 year period to bring previously untaxed income and gains to the UK with tax at a flat rate of 12%
ā¢ These changes are expected to raise Ā£2.7bn in additional taxation and encourage non doms to bring money into the UK economy
ā¢ Very importantly, an intention to move to a residence based regime for Inheritance Tax has been announced
o The Government announced a future consultation on the best way to achieve this with no changes to take effect before 6 April 2025
o There is a proposal for a 10 year exemption period for non dom new arrivals and a 10-year ātail-provisionā for those who leave the UK and become non-resident
ļ§ There is likely to be a worldwide IHT liability in the intervening period, even for those currently considered non dom
ļ§ Although perhaps likely, there is no clear indication whether this will apply only to non doms
ļ§ It raises the question whether UK doms, including those domiciled by origin, leaving the UK may qualify for any future 10 year ātail-provisionā
ļ§ The Chancellor did say there was an intention to āabolish the concept of domicileā
ļ§ See Section 5.29, page 71, of this pdf for more detail
o The current planning opportunity for Excluded Property Trusts may now have a short shelf life and requires urgent planning for non doms intending to reside in the UK
Capital Gains Tax on Property
ā¢ The higher rate of CGT on property is going to be reduced from 28% to 24%
ā¢ Both the Treasury and the OBR agree this measure should increase transactions and increase the total tax take, even at the lower rate of taxation
National Insurance
ā¢ A further cut to Class 1 National Insurance Contributions for employees. The current rate of 10% will reduce to 8% (it was cut from 12% to 10% in the Autumn Statement 2023)
ā¢ National Insurance Contributions for the self-employed cut from 8% to 6%
ā¢ OBR project this to increase GDP by 0.4% and encourage 200,000 people back to work
ISA Allowances ā a new āBritish ISAā
ā¢ Reforms to ISAs to encourage people to save more in UK listed companies
ā¢ Introduction of a British ISA ā extra Ā£5,000 ISA Allowance for investing in UK equities
Abolish Furnished Holiday Lettings Relief
ā¢ Tax breaks for owners of holiday let properties scrapped, to increase supply of rental properties to longer-term residents
Pension Funds
ā¢ The Government intends to bring forward requirements for DC pensions to publicly disclose the breakdown of their asset allocations, including UK equities. The FCA will consult in the spring
ā¢ The Government has confirmed that it remains committed to exploring a lifetime provider model for DC pension schemes in the long-term
Other Announcements:
ā¢ Public sector productivity plan to digitally transform the NHS and other public services to boost productivity
ā¢ Alcohol duty was frozen in the last statement until August 2024, this has been extended until February 2025
ā¢ The 5p cut to fuel duty from the last statement will be extended for another 12 months
ā¢ From April 2024, High Income Child Benefit Charge threshold increases from Ā£50,000 to Ā£60,000 and partial child benefit to be paid where highest earner earns up to Ā£80,000, and from April 2026 planned reforms to make it a household-based charge.
ā¢ The energy profits levy will be extended by an additional year to March 2029
