United Kingdom

Spring Budget 2024

The Chancellor of the Exchequer delivered his Budget on 6 March 2024, announcing the following:

• Plans to abolish the current tax regime for non-UK domiciled individuals, to be replaced with a residence-based regime (see below for more detail).
• The main rate of Class 1 employee national insurance contributions (NICs) will be further reduced from 10% to 8% from 6 April 2024.
• The higher rate of capital gains tax (CGT) on residential properties will be reduced from 28% to 24% from 6 April 2024.

Changes proposed to the current tax regime for non-UK domiciled individuals

In the Spring Budget 2024, the Chancellor announced his proposal for the current tax regime for non-UK domiciled individuals to be abolished from 6 April 2025 and a new residence-based regime to be introduced in its place. Proposals for transitional measures designed to smooth the impact of the changes were also announced.

We expect these proposals to be picked up by an incoming government following the general election. A new government is likely to make changes to the original proposals, but we still expect a new regime to be introduced with effect from 6 April 2025. This section will be updated once further details are known, expected to be towards the end of 2024.

Key proposed changes with effect from 6 April 2025 

• Individuals will be subject to UK tax on their foreign income and gains where they have been a UK resident for more than four years, regardless of their domicile status.

• Trust protections will be removed and income and gains within a trust will be taxed on the UK resident settlor (if settlor interested).

• New arrivers will qualify for a new foreign income and gains (FIG) regime for their first four years of UK residence, provided they have been non-UK tax resident for the previous ten years. Under the FIG regime, they will not have to pay tax on their foreign income and gains and will be free to bring those funds into the United Kingdom.

Proposed transitional measures for existing non-UK domiciled individuals

• A one-year (2025/26) tax amnesty allowing 50% of foreign income (not gains) to be exempt from UK tax. 

• Temporary Repatriation Facility (TRF) offers a two-tax-year window (2025/26 and 2026/27) for historic unremitted income and gains to be brought to the United Kingdom and taxed at a favourable rate of 12%.

• CGT rebasing allowed for non-UK assets held at 5 April 2019.

Inheritance tax (IHT)

It is proposed (subject to consultation) that IHT will also be moved to a residence-based system. Individuals will be subject to UK IHT on their worldwide assets once they have been resident in the United Kingdom for ten years. There will also be a ten-year 'tail', whereby individuals will remain subject to UK IHT for ten years after they cease to be UK resident. Non-UK assets held by non-UK trusts set up by non-UK domiciled settlors prior to 6 April 2025 are intended to remain outside the scope of UK IHT.

Other points to note

• Overseas workday relief (OWR) will still be available for eligible employees in their first three years of UK tax residence, as long as they are eligible for the FIG regime. This relief applies to income from employment duties carried out overseas.

• Business investment relief (BIR) will continue to be available for qualifying investments made prior to 6 April 2025 and new investments made on or after 6 April 2025 using pre-6 April 2025 foreign income and gains.

Basis period reform

The United Kingdom (UK) government has brought in significant changes to the way self-employed individuals are taxed on trading profits. The changes are called ’basis period reform‘. The new measures do not impact the UK taxation of non-trading income or capital gains. For further details, see ‘Basis period reform’ in the Other issues section.