Labour have now published a policy paper confirming they intend to overhaul the current domicile based tax rules for Income Tax, Capital Gains Tax & Inheritance Tax from 6 April 2025.
Full details are to be announced in the October 30th 2024 Budget, however the following currently applies:
Changes for Individuals
The current domicile regime will be replaced with Foreign Income and Gains (FIG) rules which will give a UK tax resident 100% relief on any FIG during their first 4 years of residence. This being on the basis that they had not been UK resident in any of the 10 consecutive tax years prior to their arrival.
The previous government had announced a transitional relief providing a 50% reduction in foreign income subject to tax for individuals losing access to the remittance basis in the first year of the new regime. However, this has now been scrapped and replaced with the following transitional reliefs:
- A form of rebasing for foreign capital assets that are disposed of after the new rules are introduced. The exact date of this rebasing will be announced in October’s budget.
- A new Temporary Repatriation Facility will be available to former remittance base users from 6 April 2025 who wish to remit FIG that arose prior to this date. The tax rate to be applied and the length of time it will be available for is yet to be announced but the government have stated it will be ‘as attractive as possible’.
For Inheritance Tax (IHT) purposes, an individual will now fall under the scope of UK IHT when they have been UK resident for 10 years, with provisions to keep them in scope for a further 10 years after leaving the UK. Any chargeable events (including death) occurring before 6 April 2025 will be charged according to existing domicile rules.
Changes for Trusts
The use of Excluded Property Trusts to keep assets out of the scope of IHT will be ended from 6 April 2025.
The intention is that the way IHT is charged on non-UK assets held in Trusts is changed so that everyone who is within the scope of UK IHT pays their taxes in the UK. The government recognises existing Trust arrangements will be in place and these changes could have significant impacts on settlors, and so considerations are being undertaken to see how these changes can be introduced ‘in a manner that allows for appropriate adjustment of existing trust arrangements’.
This is an incredibly complex area of taxation and will be dependent upon individual circumstance. Please get in touch if you would like to talk about your specific circumstances.
Contact us on 01242 776000 or tax@randall-payne.co.uk.
