United Kingdom

Autumn Budget 2024

The Chancellor of the Exchequer delivered her Budget on 30 October 2024, announcing the following:

• The remittance basis of taxation for non-UK domiciled individuals will be abolished, with the concept of domicile being replaced with a residence-based regime from 6 April 2025 (see below for more detail).
• Agricultural property relief and business property relief will be reformed from 6 April 2026 with 100% relief for the first 1 million pounds sterling (GBP) of combined assets and 50% relief thereafter.
• Relief for shares not listed on a recognised stock exchange (such as the Alternative Investment Market [AIM]) will also be halved to 50% from 6 April 2026.
• From 6 April 2027, unspent pension pots (including death benefits payable from a pension) will be brought into a person's estate for inheritance tax (IHT) purposes.
• The lower rate and main rate of capital gains tax (CGT) increased from 10% and 20% to 18% and 24%, respectively, for disposals made on or after 30 October 2024.
• The rate of CGT applying to carried interest will increase to 32% from 6 April 2025 and then the carried interest regime will move to the income tax framework from 6 April 2026 onwards, with a consultation in the meantime on what qualifies as carried interest.
• The rate of employer national insurance contributions (NICs) will increase from 13.8% to 15% from 6 April 2025. The secondary threshold (the amount at which employers start to pay NICs) will be reduced from GBP 9,100 to GBP 5,000 a year from 6 April 2025 until 6 April 2028 and then increased in line with the consumer price index (CPI) thereafter.

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

In the Autumn Budget 2024, the Chancellor announced her 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.

Key announced 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 tax 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.
• Overseas workday relief (OWR) will still be available for eligible employees in their first four 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. The new regime will be subject to an annual cap (exception for those who arrived in 2023/24 or 2024/25). That cap will be the lesser of GBP 300,000 or 30% of 'relevant qualifying employment income' per tax year (i.e. the maximum relief over the four years is GBP 1.2 million).

Transitional measures for existing non-UK domiciled individuals

• Temporary Repatriation Facility (TRF) offers a three-tax-year window (2025/26, 2026/27, and 2027/28) for historic unremitted income and gains to be brought to the United Kingdom and taxed at a favourable rate of 12% for the first two years and 15% for the third year.
• CGT rebasing allowed for non-UK assets held at 5 April 2017. To be eligible the individual must have made a claim for the remittance basis in 2017/18 or a subsequent tax year. Assets will be rebased to their market value as at 6 April 2017; they must have been held by the individual at that date and situated outside the United Kingdom from 6 March 2024 to 5 April 2025. 

Inheritance tax (IHT)

From 6 April 2025, the current IHT system, based on domicile, will be replaced with a residence-based system. Individuals will be subject to UK IHT on their non-UK assets once they have been resident in the United Kingdom for ten tax years. An individual who has been UK resident for more than ten of the last 20 tax years will be considered a ‘long-term resident’ (LTR).

Please note that UK situs assets will always be within the scope of UK IHT, irrespective of an individual’s domicile or residence status.

LTRs who leave the United Kingdom will remain subject to UK IHT for up to ten years after they cease to be UK resident. The length of the LTR ‘tail’ will be three years for those resident in the United Kingdom between ten and 13 tax years, increasing by one year for every additional year of UK residence, up to a total of ten. 

Offshore trusts will also be brought within the scope of UK IHT where the settlor is an LTR in the United Kingdom (i.e. has been in the United Kingdom for more than ten years).

Other points to note

• 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. New investments can continue to be made until 5 April 2028, after which time it will not be possible to make any further investments under BIR.

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.