The Chancellor of the Exchequer, Jeremy Hunt, delivered his Spring Budget on the 6 March 2024.
Whilst the Spring Budget did not offer any major surprises from what was already predicted in the media, some of the measures may have an impact on Channel Island individuals and businesses with connections to the UK, particularly those with UK Real Estate interests and UK ‘non-doms’.
We have set out some of the key measures below:
Abolition of ‘non-dom’ tax regime
As predicted, the Chancellor announced the abolition of the ‘non-dom’ regime from 6 April 2025, to be replaced by a “modern, simpler and fairer residency-based system”.
In broad terms, the current remittance basis of taxation will be replaced with a new 4-year foreign income and gains (FIG) regime for eligible individuals. Eligible individuals who opt into the scheme will therefore not pay tax on FIG arising in the first four years, and will be able to remit these funds to the UK free from any additional charges. Similarly, they will not be subject to tax on non-resident trust distributions.
Under the new regime, individuals will not be required to track the movement of their FIG through investments in the way they are required to do under the current remittance regime, making the new 4-year FIG regime administratively simpler.
If an individual chooses to be taxed under the new 4-year FIG regime, they will continue to lose entitlement to personal allowances and the Capital Gains Tax annual exempt amount.
Overseas Workday Relief (OWR)
This will also be reformed in light of the above changes. The new OWR is intended to continue to provide eligible individuals income tax relief for earnings from duties carried on outside the UK for the first three years of tax residence with restrictions on remitting these earnings removed.
Inheritance Tax (IHT)
The UK government also intends to move IHT from a domicile based regime to a residence based regime from 6 April 2025, and there will be a consultation on the best ways to achieve this.
Capital Gains Tax (CGT) on residential property
A higher rate of CGT cut from 28% to 24% from 6 April 2024 to boost the UK residential property market.
Abolishment of the Furnished Holiday Lettings (FHL) tax regime
The FHL tax regime will be abolished, eliminating the tax advantage for landlords who let out short-term furnished holiday properties over those who let out residential properties to longer-term tenants. This will take effect from 6 April 2025.
Capital Allowances
Following the introduction of the ‘full expensing’ system in the Autumn Statement, which allows businesses to write off the full cost of qualifying plant and machinery investment against their taxable profits, the government intends to extend this regime to leased assets with draft consultation to follow.
Further reduction to National Insurance Contributions (NIC)
Further to the cuts announced by the Chancellor in the Autumn Statement, a further 2% reduction in the main NIC rate was announced from 6 April 2024 (from 10% to 8%).
If you have any questions, or would like to discuss any of the areas covered in our summary in more detail, please get in touch with your usual contact to discuss how the Budget might impact you or your business.
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