Private client update UK Budget 2024 – Introduction
Wednesday’s budget announcement held few surprises due to prior leaks, but it did bring unexpected changes for private clients, notably a substantial overhaul of the “non-dom” tax regime and a reduction in capital gains tax (CGT) for certain residential property sales.
Here’s a breakdown of the key points…
National Insurance Contributions (NICs)
The government announced a further 2p reduction in the main rates of NICs for employees and the self-employed, starting 6 April 2024.
This cut, following reductions made in the 2023 Autumn Statement, lowers Class 1 employee NICs from 10% to 8%, and the main rate of Class 4 self-employed NICs to 6%.
Additionally, the government plans to abolish Class 2 NICs.
Reforming the “Non-Dom” Tax Regime
In a move more drastic than anticipated, the Chancellor plans to replace the current “remittance basis” of taxation for non-UK domiciled individuals with an “exemption regime” based on residence from April 2025. U
Under the new system, non-doms non-tax resident for the last ten years will enjoy a four-year exemption from UK tax on foreign income and gains, after which they’ll be taxed like other UK residents.
Transitional Arrangements for Non-Doms
Transitional measures will allow existing non-doms using the remittance basis to rebase the value of capital assets to April 5, 2019, figures.
They’ll also benefit from a temporary 50% exemption for foreign income taxation in the first year of the new regime and a two-year “temporary repatriation facility” to bring foreign income and gains into the UK at a reduced tax rate.
Inheritance Tax (IHT)
Despite speculation, there were no changes to IHT announced.
The government did mention a move to a residence-based regime for IHT and will consult on the best approach, with no changes expected before 6 April 2025.
Capital Gains Tax (CGT)
Unexpectedly, the Chancellor announced a reduction in CGT on residential property sales from 28% to 24% starting April 6, 2024.
This aims to incentivize the sale of second homes and rental properties, potentially increasing housing availability.
Property Taxes
The abolition of both the “furnished holiday lettings” tax regime and the SDLT “multiple dwellings relief” were announced as measures to make the property tax system fairer and more efficient.
The FHL regime will be removed from April 2025, and the MDR abolition will be effective from June 1, 2024, with certain grandfathering provisions.
Private client update following UK Budget 2024 – Looking Ahead
With a general election on the horizon, the focus shifts to the potential response and policies of the Labour party, especially regarding the proposed non-dom tax changes set for April 2025.
Preparing for possible legislative changes after the election is crucial for those who may be impacted by tax increases.
Seeking professional advice now can provide clarity and prepare individuals for any future tax changes.
Final thoughts
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