The Labour Party has tabled their first Budget in nearly one and a half decades. The changes are set to have a big impact on expats, especially those with high net-worths. Below, we take a close look at some key announcements from the Autumn Budget that foreigners working in the UK and British expats should be aware of.
Non-dom tax status abolished
One of the biggest changes is the abolition of the non-dom tax status, which the chancellor described as an "outdated concept". Starting from April 2025, a new residence-based system will replace the current regime. This is expected to raise £12.7 billion over the next five years, but it could be painful for non-doms who must pay more out of pocket.
Pension changes
There were some notable pension-related changes in the Budget. From April 2027, inherited pension pots will be counted as part of your estate for inheritance tax (IHT) purposes. This will affect both UK pensions and qualifying non-UK pension schemes (QNUPS).
The government has also announced the removal of the Overseas Transfer Charge (OTC) exclusion for Qualifying Recognised Overseas Pension Schemes (QROPS) established in the EEA and Gibraltar. This means UK residents will no longer be able to benefit from double the amount of tax-free cash when transferring to a QROPS in those locations.
Private school fees and VAT
Private schools in the UK are currently exempt from Value Added Tax (VAT), but this is set to change from 1 January 2025. The introduction of 20% VAT on private school fees is expected to result in a 10% average increase in costs for expat parents.
Property taxation
The Autumn Budget brought bad news for landlords, property investors, and anyone buying second homes. The stamp duty surcharge on extra properties has increased from 3% to 5%. The single rate of stamp duty for companies buying residential properties valued at £500+k has gone up from 15% to 17%.
Rise of capital gains tax
Investors and expats will also be affected by the increase in capital gains tax (CGT) rates. For basic rate taxpayers, CGT will rise from 10% to 18%, while for higher rate taxpayers, it will go up from 20% to 24%. The existing rates for property remain the same at 18% (basic rate) and 24% (higher rate).
Business taxes
Expats and high net-worth persons with businesses will bear the brunt of the Autumn Budget, with more than 60% (£25 billion) of the £40 billion in extra taxes coming from increases to National Insurance Contributions (NICs) for employers. The NIC rate for employers will increase by 1.2% to 15%, and the threshold for paying them will be reduced from £9,100 to £5,000.
We are here to help: What should expats do next?
The Autumn Budget has brought about big changes, particularly for high-net-worth expats. It's crucial to review your residency status, tax obligations, property holdings, and estate planning strategies to ensure you are prepared for changes introduced in the Autumn Budget 2024. At International Wealth Ventures, we are here to help you every step of the way.