A policy paper published by Chancellor Rachel Reeves on 27 July 2024 outlines significant changes to the taxation of non-UK domiciled individuals. These changes are set to come into effect from 6 April 2025, with further details expected in the upcoming Budget on 30 October 2024. Here’s a breakdown of what’s changing and how it might affect you.
Major Updates in Taxation Policies
Residence-Based Taxation System
- The Government is abolishing the remittance basis of taxation, replacing it with a new regime that offers 100% relief on foreign income and gains for the first four years for new UK residents who have not been UK tax residents in any of the prior 10 years. This shift aims to simplify the tax system while maintaining competitiveness to attract global talent and investment.
Capital Gains Tax (CGT) and Inheritance Tax (IHT) Modifications
- CGT rebasing may be available for current and past users of the remittance basis, with details on the rebasing date to be announced. Additionally, from 6 April 2025, UK residents who previously benefited from the remittance basis but do not qualify under the new regime will face standard CGT on foreign gains.
- The government intends to replace the current domicile based inheritance tax system to one based on tax residence from 6 April 2015. This will affect the scope of assets brought into UK inheritance tax for individuals and trusts. Further consultations and stakeholder engagement is ongoing and more details will be announced in the forthcoming Budget.
Temporary Repatriation Facility (TRF)
- A TRF will be introduced allowing individuals who previously claimed the remittance basis to remit foreign income and gains that arose before 6 April 2025, to the UK at a reduced tax rate for a limited time, making it financially appealing to repatriate these funds.
Review of Anti-Avoidance Legislation
- The government plans to review and potentially reform offshore anti-avoidance legislation, including the Transfer of Assets Abroad and Settlements legislation, with changes expected no earlier than the 2026/27 tax year.
How Beavis Morgan Can Help
These upcoming changes are significant and could impact various aspects of tax planning for non-UK domiciled individuals. Beavis Morgan is well-positioned to guide you through these changes, ensuring that you understand the implications and can plan effectively.
Neal Groves, Beavis Morgan tax partner, emphasises the importance of early consultation: “With the transition to a residence-based system, it’s crucial for affected individuals to understand the new landscape. We’re here to provide expert guidance to navigate these changes, optimise your tax position, and ensure compliance.”
As further details are expected in the upcoming October Budget, we recommend contacting us for a personalised consultation to prepare for these changes. Our team is ready to assist with detailed assessments and strategic planning tailored to your unique circumstances.
For more information and to discuss how these changes may specifically affect you, please contact Neal Groves or Barrie Dunning.