A summary of the measures
Reform of the UK Non-domicile regime
The current non-dom regime, and associated remittance basis of taxation, will be abolished from April 2025, to be replaced with a new regime based on residence and length of stay in the UK. The Government will also consult on reforming Inheritance Tax to move to a residence-based regime, although no changes are expected before April 2025. Transitional provisions have been announced to encourage existing non-domiciled individuals resident in the UK to remit historic unremitted foreign income and gains to the UK.
The key measures are summarised as follows:
The taxation of newly resident individuals
- The new regime will introduce full tax relief for foreign income and gains arising in an individual’s first four years of tax residence in the UK
- Foreign income and gains can be remitted freely to the UK without any additional UK tax charge
- After the end of the four-year period, individuals will be taxable in the UK on their worldwide income and gains
- The regime will be available to individuals with 10 consecutive years of non-UK residence prior to their arrival in the UK
Transitional provisions
- A temporary 50% reduction in personal foreign income subject to tax in 2025/26 for non-doms losing access to the remittance basis and not qualifying for the new four-year exemption regime
- Rebasing of capital assets to 5 April 2019 values, so future disposals can be taxed by reference to the April 2019 value rather than original cost
- Previously unremitted foreign income and gains can be remitted to the UK at a rate of 12% in 2025/26 and 2026/27 under a new “Temporary Repatriation Facility”. It is unclear how such unremitted income and gains will be taxed after April 2027.
Implications for offshore trusts
- All protections for non-resident trusts will be removed from 6 April 2025, such that UK resident settlors of non-UK trusts may be subject to UK tax on income and gains of non-resident trusts arising after 6 April 2025.
- Foreign income and gains arising before 6 April 2025 will not be taxable in the UK unless distributions or benefits are paid to UK residents.
- Non-UK situs assets settled into a non-UK trust by a non-UK domiciled settlor prior to 6 April 2025 will continue to be outside the scope of UK IHT. The treatment of assets settled after this date will be subject to the consultation on IHT.
We await further details on the operation of the provisions, however it is clear that these measures will have significant implications for non-UK domiciled individuals and offshore structures established by non-UK domiciled individuals. Trustees and administrators should review the structures that may be affected by these proposals and consider whether such structures will continue to be effective. There are also opportunities for Jersey trustees given the commitment to maintain IHT exemptions for non-UK assets settled into an offshore trust prior to 6 April 2025. Non-UK domiciled individuals who have plans to move to the UK in coming years may wish to explore establishing an offshore trust prior to 6 April 2025 to protect their non-UK assets.
UK property taxation
Three significant announcements were made to reform UK property taxation:
- The Furnished Holiday Lettings Relief will be abolished from 6 April 2025, with owners of UK residential property subject to income tax under existing property business rules.
- Capital gains tax on residential property was taxed at a higher rate of 28%, compared with the standard rate of 20% From 6 April 2024, the rate of CGT on residential property disposals will be reduced to 24%. The lower rate will remain at 18% for gains falling within an individual’s basic rate band. This reduction is CGT is applicable for individuals and trusts holding UK residential property, and is expected to also apply to disposals of indirect UK property interests.
- Multiple Dwellings Relief for SDLT will be abolished from 1 June 2024. Purchases completed after this date will be subject to SDLT at existing rates, with no relief on the bulk purchase of residential property. Contracts exchanged before 6 March 2024, and purchases completed before 1 June 2024 will be able to benefit from the relief.
These are measures which may have a substantial impact on the UK real estate industry in Jersey. The reduction in CGT on residential property to 24% is aimed at encouraging the sale of UK residential property and will benefit individuals and trusts in Jersey with UK residential property interests.
Multiple dwellings relief is a substantial SDLT relief, and its removal will impact the future of multi-property transactions. There is an added impetus to conclude such transactions before 1 June 2024 if multiple dwellings relief is to be relied upon on the purchase.
Corporate tax
Few Corporation tax measures were announced in the Spring Budget, which is to be welcomed following the significant uncertainty of recent years. The main policy announcement was to extend full expensing on capital expenditure to assets for leasing. There is no timetable for introducing this extension, with the Chancellor noting measures will come into effect “when fiscal conditions allow”. Reliefs were also announced for independent film productions, theatres, orchestra, museum and galleries. This is of primary interest to domestic UK companies and is unlikely to have a significant impact for companies and businesses based in Jersey.
Personal taxes
The principal announcements on personal taxes were in respect of the cut to National Insurance Contributions and the increase in the High Income Child Benefit Charge threshold. As with corporation tax, the primary focus was on domestic taxpayers and these announcements will have limited implications for individuals resident in Jersey.
Tax avoidance
Few specific measures anti-avoidance measures have been announced in the budget, with the abolition of reliefs being the primary anti-avoidance policies. The Government continue to clamp down on promoters of tax avoidance, announcing consultations on options to strengthen regulation in the tax adviser market and requiring advisers to register with HMRC. An additional £140m in funding for to HMRC has also been announced specifically to improve HMRC’s management of tax debts, with a view to raising an additional £4.3bn over six years. An immediate change to the Transfer of Assets Abroad regime was also announced, capturing transfers abroad by close companies held by UK residents.
Other announcements and consultations
The Chancellor also announced the following measures and consultations:
- Consultation on the UK’s implementation of the Cryptoasset Reporting Framework and amendments to the Common Reporting Standard.
- The introduction of the Reserved Investor Fund, a UK based unauthorised contractual scheme, aimed primarily at investment in the UK commercial property market.
- Increase in the VAT registration threshold to £90,000 from 1 April 2024
The Spring Finance Bill will be introduced at the end of month where we expect further details on the measures.
Zaeem has many years of experience advising individuals, trustees and businesses investing into the UK via the Channel Islands.
If you have any questions or concerns about the implications of the Spring Budget please get in touch with Zaeem or our tax team who will be happy to help.
