UK Spring Budget 2024
The UK’s Chancellor of the Exchequer delivered his Spring Budget today to a rowdy House of Commons that had to be called to order before it had even properly started. Noting this is an election year, he painted a positive picture of the UK’s economy stating the UK had the lowest national debt in the G7, inflation had been reduced, and growth since 2010 under the Conservatives has been higher than every large European economy and the OBR expects growth to continue until 2027. The Chancellor wanted his policies to generate “more jobs, more investment and lower taxes”.
He started his Budget by saying he would look to reduce taxes and referred to a “tax-cutting Budget”. This theme was revisited throughout his speech.
From a personal tax perspective, everything Hunt announced had already been trailed in the press. There had been a lot of pressure in the run-up to the Budget for the Chancellor to reduce taxes and there was recent speculation in the press that he was considering changes to the “non-dom“ regime.
The headline announcements in respect of personal taxes are:
- The current “non-dom” system will be abolished from April 2025 and replaced with a “modern, simpler and fairer system”. In summary, new “non-dom” arrivals to the UK will not be required to pay any tax on non-UK income or gains for the first four years and thereafter they will pay the same tax as other UK tax residents. There will be transitional arrangements over a 2-year period including plans to encourage people to bring money to the UK from overseas.
These changes are likely to impact many of our clients. It will be important to understand how these rules will be implemented, especially for non-doms already living in the UK, and consider any tax planning opportunities, particularly during the transitional period.
Further, whilst there was no mention during the speech as to how abolishing the non-dom regime might impact inheritance tax (“IHT”) the Government has announced that it intends to replace the current IHT regime with a residency-based system and will consult on how to implement this. UK IHT and US estate tax are another important consideration for many Americans coming to the UK. The UK inheritance tax threshold is significantly lower than the equivalent US lifetime exemption (which is due to sunset in 2026).
There are a number of questions that will need to be answered in respect of these announcements. We look forward to receiving further guidance on the proposed changes, particularly on the abolishment of the non-dom regime. However, whilst the Chancellor talked of “permanent” tax cuts it should be noted that nothing is permanent!
If you would like to discuss how these changes might impact your UK/UK tax position please do not hesitate to contact us.