UK Chancellor’s 2024 Autumn Statement Highlights

Autumn Budget or The Roast of Jeremy Hunt? However you want to refer to it, there are a lot of changes to the UK tax regime to be discussed! Please find below an initial summary of the key takeaways from today’s UK Autumn Budget.

As expected, and pledged by the Labour government, the non-domicile regime will be scrapped in April 2025 and a new residence-based system will be introduced. From 6 April 2025, all UK residents will be taxed on the arising basis of taxation. A new foreign income and gains (“FIG”) regime will be available to individuals for their first four years of UK tax residence after a period of ten years of non-residence. Individuals making a claim for the FIG regime will not pay tax on FIG arising in those four years.

From 6 April 2025, the protection from tax on FIG arising within settlor-interested trust structures will also no longer be available for non-domiciled and deemed domiciled settlors who do not qualify for the 4-year FIG regime.

The Temporary Repatriation Facility (“TRF”) will be introduced by 6 April 2025 to encourage individuals to remit to the UK their FIG which arose in earlier periods and were not taxed in the UK following remittance basis claims. This scheme has been extended and will be in place for three years. Designated amounts will be taxed under the TRF regime at 12% in 2025/26 and 2026/27, with the rate increasing to 15% in 2027/28. The technical note published alongside the Budget states that it will not be possible to set any foreign tax credit against the TRF charge. Nonetheless, we anticipate that this will provide a tax planning opportunity for a number of clients who want to remit prior year foreign income and gains to the UK.

The TRF will also be available for qualifying UK resident settlors or individuals who receive a benefit from an offshore trust structure during the three tax years from 6 April 2025.

The Inheritance Tax (“IHT”) system is currently a domicile-based system. The Government had previously said it planned to reform IHT. The Chancellor announced today that IHT will move to a residence-based system from 6 April 2025. Another pledge by Labour was to remove trust protections that shelter assets from UK Inheritance Tax (IHT) and this has been confirmed.

Moreover, from April 2027, inherited pensions are to be included in estates and subject to IHT. Lastly, the nil rate band of £325,000 will remain frozen although the Chancellor committed to increasing the nil rate band in 2030/31.

It had widely predicted that there would be significant increases to the Capital Gains Tax (“CGT”) rates and whilst this was the case the increases were not as high as had been previously suggested in the Press. CGT rates are to be increased with the lower rate to be increased from 10% to 18% and the higher rate from 20% to 24% from 30 October 2024.

The rate on carried interest will also be increased to 32% from 6 April 2025. There were also commitments to simplify and deliver reforms to the taxation of carried interest from 2026.

As part of the transitional rules for the new FIG regime, current and past remittance basis users can rebase their personally held foreign assets to 5 April 2017 on a disposal where certain conditions are met.

There were other tax changes referred to in the Autumn Budget document that were not covered in the Chancellor’s speech. Changes that are likely to be of interest to the expatriate community include:

• Changes to the Overseas Workday Relief (OWR) scheme from 6 April 2025. This will be based on an employee’s residence and not their domicile. An annual financial limit for each qualifying year will be introduced: the lower of 30% of the qualifying employment income or £300,000 per tax year. Where an employee is eligible for the FIG regime in a tax year, they can make a OWR election which will allow them to make a claim for relief.
• The government is committed to tackling offshore non-compliance as part of the ambition to close the tax gap and is committing additional resources.
• A consultation document will be published to tackle challenges arising from the mismatch of information on offshore interest being provided on a calendar year basis rather than a UK tax year basis. This will apply to many of our clients who receive their US tax information on a calendar year basis. “The consultation is seeking views on options to address this mismatch, including changes to the rules so that individuals are taxed on the non-UK interest arising in the year ended 31 December that ends in the tax year.” We hope that this might be expanded to include other sources of income commonly reported on a calendar year basis.

Perhaps surprisingly, the Chancellor announced that income tax rates and allowances will not be frozen beyond 2027/28. And whilst she stuck to the pledge not to increase income tax rates and employee national insurance contributions, employer national insurance contributions are to be increased significantly for large employers with some relief for smaller employers. The secondary threshold when contributions would be due fall from £9,100 to £5,000 although the employment allowance to be increased from £5,000 to £10,000.

Other commitments announced today are to modernise HMRC systems, invest in compliance and debt facilities, cap corporate tax rates at 25% and increase late payment interest by 1.5%.

There have been a lot of tax changes announced in today’s Budget many of which will be of particular interest to individuals with an international tax footprint. We will provide further updates as we receive and digest the new rules. In the meantime, if you would like to discuss how these might impact you, please contact us.

Article written by Harry Swift and Sina Rajaei