Thoughts on The UK Budget 2024

On 6th March 2024 the UK Chancellor of the Exchequer, Jeremy Hunt, delivered his second Spring Budget for the current Conservatve Government.

Contained within the Budget were proposals for a change to the current system of taxation of non-domiciled individuals with effect from 6th April 2025, from the existing regime where UK resident non-domiciled individuals are only taxed on income or capital gains remitted to or originating in the UK, to a regime based on residence whereby all UK residents will pay UK tax on foreign income and gains following four years of residency.

In addition, from 6th April 2025 the protected trust regime will also effectively cease to apply, with the result that income and gains in affected trust structures could become taxable on the settlor(s) from that date.

Mention is also made of the intention to change the inheritance tax laws so that exposure is determined by reference to residence rather than domicile. However, these plans have yet to be detailed and will be subject to consultation.

“Hope for the best and prepare for the worst” T. Norton & T Sackville

Whilst the above is a departure from the Conservative’s previous stance on the status of non-doms it is very much in line with proposals mooted by Labour over the years.

At present, these are only proposals and the legislation (whatever form it may take) is yet to be drafted let alone come into effect. It remains to be seen what form any Conservative legislation would eventually take or whether, should the matter still be in abeyance at the time of the next General Election and Labour come to power. It is likely they would want to put their own stamp on the matter and one would assume that any amendments that Labour introduce would be unlikely to dilute the Conservative proposals.

Therefore it is recommended that existing Non-doms and those considering re-locating to the UK to consider how they may wish to (re-)structure their affairs prior to 6th April 2025 and discuss their options with a qualified tax advisor. As a starting point there are numerous articles freely available discussing the terminology used in the Budget and the effect that the proposed changes may (or may not) have, depending on how they are implemented.

Options that individuals may wish to consider include (but are not limited to):

  • Use of an insurance wrapper or other insurance-based products
  • Use of a Family Investment Company
  • Formation of an excluded property trust now whilst delaying the funding of the trust until clarification on the future inheritance tax regime
  • Accelerating the receipt and realisation of foreign income and gains where possible to crystalise Foreign Income and Gains (FIG) as detailed in the Budget
  • Requesting trust distributions prior to 5 April 2025 to generate foreign income and gains for the same purpose (assuming this is not blocked by the new rules)
  • Where possible amending the terms of existing trusts in order to minimise the impact of the loss of the trust protections (such as the exclusion of the settlor and certain other family members so as to prevent the attribution of income and gains to the settlor)

“If not now, when?” Hillel the Elder

While it is true that “Only death and taxes are certain” there does appear to be some leeway with the second as to the form it may take provided action is taken in a timely manner.

Additional Information

For further information on private wealth structures and their management, please contact John Nelson, Managing Director, Dixcart Trust Corporation Limited, Guernsey:

Dixcart Trust Corporation Limited, Guernsey: Full Fiduciary Licence granted by the Guernsey Financial Services Commission. Guernsey registered company number: 6512.

Back to Listing