Autumn Budget 2024
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31/10/2024
Autumn 2024 Budget Rachel Reeves announced her first budget yesterday. We have gone through what was announced and tried to identify the main changes to National Insurance, Income Tax, Capital Gains Tax and Inheritance Tax that would affect individuals with a particular focus on US citizens resident in the UK. Key measures National Insurance The biggest change was to National Insurance. The employer’s rate was raised from 13.8% – 15% as well as reducing the threshold at which employers NIC starts to be paid from £9,100 to £5,000. These changes will not directly impact employees. However, the Office For Budget Responsibility expects that over time most of the increase will be borne by employees as the rise in costs is passed on in the form of lower wages rises in the next few years. Income Tax No significant changes to Income Tax are proposed except in relation to the taxation of Non -Domiciles (see below). Capital Gains Tax The main Capital Gains Tax rates will rise for disposals on or after 30 October 2024 from 10% and 20% to 18% and 24% respectively. The change will take effect for disposals made on or after 30 October 2024. No changes will be made to the 18% and 24% rates of Capital Gains Tax that apply to residential property gains. There were also changes announced to Investors Relief reducing the lifetime limit from £10m to £1m and a reform of the taxation of carried interest. Non-UK Domiciled Individuals With effect from April 2025, the current remittance basis of taxation for non-UK domiciled individuals will be replaced by a residence based regime. Individuals who opt into the new regime will not pay UK tax on foreign income and gains (FIG) for the first 4 years of tax residence. From 6 April 2025, the government will also introduce a new residence-based system for Inheritance Tax. There will also be some transitional provisions including a Temporary Repatriation Facility for individuals who have previously claimed the remittance basis. Overseas Workday Relief will continue and be extended to 4 years to align with the new 4-year foreign income and gains regime, although there will be other changes including a cap on the amount of relief that can be claimed. Inheritance Tax The main changes to Inheritance Tax are:-
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Main Implications For US Citizens Resident In The UK:
The changes to the non-dom regime mean that anyone resident in the UK for more than four years will be taxable on their worldwide income from their fifth year. Previously this did not kick in until the eighth year (unless you were wealthily and paid the remittance basis charge). The increases in the main capital gains tax rates (to 18% and 24%) will mostly impact the sale of shares. (Note that gains within an ISA are not subject to capital gains tax). US citizens should remember that they may also need to pay the US Net Investment Income Tax or NIIT which is charged at 3.8% on top although, in general, they should not have to pay any US income tax on capital gains as in most cases the capital gains tax paid in the UK should fully offset the US tax. Currently the US threshold for estate and gift tax is over $13m and so very few people will be subject to estate or gift tax. Therefore the change to the inheritance tax treatment of pensions, bringing the them into the estate of the deceased person would generally be expected to increase the amount of inheritance tax paid. The changes to agricultural and businesses property relief would also have a negative effect, but relatively few estates would be affected. |