Autumn Budget 2024 – New Regime for Non-Doms Confirmed

The waiting is over. We began many months ago with the Conservative Party's proposal for the abolition of the remittance basis of taxation for non-doms, subject to transitional relief. This was followed by confirmation by the new Labour government that they broadly agreed with the proposals but wanted to close "loop holes". There was then a "listening campaign" where the Treasury held sessions with advisers on how the rules might deter investment in UK and drive mobile non-doms to other jurisdictions (UAE, Monaco, Italy, Portugal, and Gibraltar to name some favourites).

We now know the detail and subject to certain tweaks, the main changes are generally as expected. There was some speculation that the Chancellor would have second thoughts over certain aspects, in particular to encourage more non-UK residents to come to the UK by making the reliefs on foreign income and gains extend longer than four years, but this has turned out not to be the case.

Although there are some winners, particularly if you have been non-UK resident for 10 years and then return to, or come and live in the UK, many will be affected by these changes and should seek early advice on their personal circumstances.

 

Impact for current UK Resident Non-Doms

The remittance basis of taxation is abolished from 5 April 2025. Current rules will continue to apply to remittances of FIGS (foreign income and gains) arising in the current tax year. On 6 April 2025, these rules will be replaced with a new residence-based system.

Most non-doms who have previously claimed the remittance basis can rebase foreign assets held on 5 April 2017 to their value at that date, transitionally.

Non-Doms who have previously claimed the remittance basis and who repatriate pre-6 April 2025 FIGS after 6 April 2025 can claim the Temporary Repatriation Facility. This will be available for three years (extended from two years, under the previous proposals). For tax years 2025-26 and 2026-27, the tax rate will be 12% (half the new CGT rate) and for 2027-28, the tax rate will be 15%. This includes unattributed foreign income and gains held within trust structures. So there is encouragement to repatriate within this three year period to get lower tax rates on income and gains built up overseas.

For FIGS arising post April 2025, if the four-year exemption period for new arrivals does not apply, there is no 50% reduction in the taxable amount of income, as had been proposed by the Conservative government to give a softer landing to non-doms already resident in the UK. Such taxpayers will pay tax on their worldwide income and gains like any other UK resident on FIGS arising post April 2025. 

Tax residence is determined by the statutory residence tests which increase in importance.

 

Impact for new arrivals into the UK, who have been non-UK resident for at least 10 consecutive tax years before they arrived in UK

Such "qualifying new residents" will be able to claim 100% relief on FIGS in their tax returns in their first four years of (or remaining period of four years) UK tax residence from April 2025.

 

Trusts-key changes

As predicted, exemption from tax on FIGS within settlor interested trust structures will no longer be available for non-doms and deemed domiciled individuals who do not qualify for the four-year FIGS exemption regime for new arrivals.

 

Inheritance Tax-key changes

Merge the below sentences so it's one paragraph

Domicile as a tax concept is replaced by the statutory residence test. Long term residents (those who have been resident in the UK for at least 10 out of the last 20 tax years) will pay IHT on their non-UK situs assets as well as their UK assets. If a long term resident leaves the UK, he / she remains subject to IHT on non-UK assets for three to 10 years after leaving the UK (according to a formula, depending on the number of years he was UK resident ), subject to any available double tax relief on IHT.

Generally on IHT, as predicted, Business Property Relief (BPR) and Agricultural Property Relief (APR) have been restricted:

• BPR
  
  • The relief rate for shares not listed on recognised stock exchanges will be reduced from 100% to 50% starting April 2026.
  • The 100% BPR relief will continue for the first GBP1 million of combined agricultural and business property, with a 50% relief rate applied thereafter.
• APR
  
  • From April 2025, APR will extend to land managed under environmental agreements with government bodies.
  • Starting April 2026, APR will be curtailed, with the same relief structure as BPR: 100% for the first GBP1 million and 50% thereafter.

Further on IHT, from 6 April 2027 most unused pension pots and death benefits will be included within the value of a person's estate for IHT purposes and pension scheme administrators will become liable for reporting and paying IHT due on such assets to HMRC.

Review of Transfer of Assets Abroad Rules and Settlement Rules

The Budget also detailed the formal announcement of a consultation on what the government calls "personal tax offshore anti-avoidance legislation", including the transfer of assets abroad rules and settlements legislation. This review was promised by the Labour government earlier in the year but it would have perhaps been neater and clearer if the non-dom changes and any changes emanating from this review were introduced at the same time, so that taxpayers could be aware of the new regime in its entirety.

Workday Relief- Overseas Employment income of Non-Doms

This is relief from income tax for non-domiciled UK residents on earnings abroad to the extent it is not remitted to UK. The new regime means that post-April 2025 earnings can be remitted without UK tax for the first four years following April 2025.

The relief is limited to the lower of GBP300,000 and 30% of the individual's income.

Individuals will no longer be able to claim income tax relief on chargeable overseas earnings earned after 6 April 2025 and for pre 5 April income, the Temporary Repatriation Relief applies.

Should you have any queries on the Autumn Budget, please reach out to your usual UK tax contact or one of the following.