We look at the key changes to the UK’s tax legislation that may significantly impact your tax, estate planning, and financial strategies, particularly if you are a non-UK domiciled (non-dom) individual or have connections to the UK. These changes arose out of the UK Labour Party government's Autumn Budget on 30 October 2024.
The UK Treasury has issued a technical note and draft legislation clarifying the proposed changes. However, please note that these proposals remain in draft form, and material changes may occur before the laws are enacted. We highlight the key changes below.
The government has confirmed a shift from the remittance basis of taxation to a residency-based regime for non-domiciled individuals, effective from 6 April 2025. Under this new system, individuals will be taxed based on their residency status rather than their domicile status, which may lead to increased tax liabilities for some.
New residents to the UK who have been non-resident for the past 10 years may elect to benefit from a four-year exemption from tax on foreign income and gains (FIG). This exemption is designed to ease the transition for individuals relocating to the UK.
Individuals who have been UK tax residents for longer than four years will now be taxed on their worldwide income and gains, losing the previous benefits associated with the remittance basis. Those who were UK tax residents prior to 5 April 2025 can claim the 4-year FIG regime for the remainder of their first four years of UK tax residence.
Current and past users of the remittance basis will have access to two transitional reliefs. They may rebase foreign assets held on 5 April 2017 to their value at that date upon disposal for Capital Gains Tax (CGT) purposes, subject to specific conditions. Additionally, individuals who have claimed the remittance basis can designate and remit previously unremitted FIG that arose prior to the changes at a reduced rate. This temporary repatriation facility will be available for three tax years, with rates set at 12% for the first two years and 15% in the final year.
Starting from 6 April 2025, non-domiciled and deemed domiciled individuals who do not qualify for or claim the 4-year FIG regime will lose tax protection on FIG arising within settlor-interested trust structures. This means FIG generated in the trust will be taxed similarly to UK-domiciled settlors.
Long-term UK tax residents will now be liable for IHT on their worldwide assets if they have been UK tax residents for 10 or more of the previous 20 years. A long-term resident is defined as a person over the age of 20 who has been a UK tax resident for at least 10 of the last 20 tax years. Non-residents and UK tax residents who do not meet this definition will only be liable for IHT on UK-situated assets. Additionally, if you leave the UK after being a long-term resident, you will still be subject to IHT for a period of three years up to 10 years depending on the period of residency beyond 10 years.
Reforms to agricultural property relief and business property relief will be implemented, alongside the inclusion of unused pension funds and death benefits in estate valuations starting 6 April 2027.
CGT rates will rise from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers for disposals made on or after 30 October 2024. Trustees will now be subject to a CGT rate of 24%.
The higher rates of SDLT for purchasers of additional dwellings will increase from 3% to 5% above the standard residential rates. The single rate for companies and non-natural persons purchasing residential properties over £500,000 will rise from 15% to 17%. These changes will apply to transactions with an effective date on or after 31 October 2024.
The government has committed to maintaining current rates for income tax and NIC ensuring no additional burden on working individuals. From 6 April 2025, the Employer NIC rate will increase from 13.8% to 15%, and the threshold for businesses to start paying NIC on employee earnings will decrease from £9,100 to £5,000 until 6 April 2028.
Implications for your planning
Given these significant changes, it is crucial for you to review your current tax arrangements and consider how these new tax changes may impact your financial situation. The shift to a residency-based taxation system, along with the reforms to IHT, CGT, and trust structures, could necessitate adjustments to your estate planning and investment strategies.
Next steps
These changes are complex, so it’s a good idea to connect with a UK tax adviser to discuss these changes and explore how they may affect your tax, financial, and estate planning. It is important that you obtain advice and seek tax guidance before taking any action. Through your wealth manager or private banker, Investec’s Tax and Fiduciary team is here to provide guidance and support as you navigate this evolving landscape.
*This article is intended for informational purposes only and does not constitute formal tax or legal advice. It should not be relied upon as such. We do not accept any liability for any actions taken based on the information provided.
Receive Focus insights straight to your inbox
Disclaimer
Although information has been obtained from sources believed to be reliable, Investec Wealth & Investment International (Pty) Ltd or its affiliates and/or subsidiaries (collectively “W&I”) does not warrant its completeness or accuracy. Opinions and estimates represent W&I’s view at the time of going to print and are subject to change without notice. Investments in general and, derivatives, in particular, involve numerous risks, including, among others, market risk, counterparty default risk and liquidity risk. The information contained herein is for information purposes only and readers should not rely on such information as advice in relation to a specific issue without taking financial, banking, investment or other professional advice. W&I and/or its employees may hold a position in any securities or financial instruments mentioned herein. The information contained in this document does not constitute an offer or solicitation of investment, financial or banking services by W&I . W&I accepts no liability for any loss or damage of whatsoever nature including, but not limited to, loss of profits, goodwill or any type of financial or other pecuniary or direct or special indirect or consequential loss howsoever arising whether in negligence or for breach of contract or other duty as a result of use of the or reliance on the information contained in this document, whether authorised or not. W&I does not make representation that the information provided is appropriate for use in all jurisdictions or by all investors or other potential clients who are therefore responsible for compliance with their applicable local laws and regulations. This document may not be reproduced in whole or in part or copies circulated without the prior written consent of W&I.
Investec Wealth & Investment International (Pty) Ltd, registration number 1972/008905/07. A member of the JSE Equity, Equity Derivatives, Currency Derivatives, Bond Derivatives and Interest Rate Derivatives Markets. An authorised financial services provider, license number 15886. A registered credit provider, registration number NCRCP262.
Partner with us
Browse further in