The New UK Tax Rules That Could Cost You Dearly

On October 31st, Labour introduced a new budget, unveiling significant tax changes set to impact High-Net-Worth Individuals (HNWIs), non-doms, and international investors with UK interests. With an estimated ￡40 billion in tax increases, the implications are considerable, especially for those managing international assets or considering UK residency. Here’s an overview of the major changes:

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1. Non-Dom Individuals

o?? End of Remittance Basis: Starting 6 April 2025, the remittance basis will be replaced by a 4-year Foreign Income and Gains (FIG) regime, which will apply even to returning British citizens.

o?? Extended Temporary Repatriation Facility: Now extended from two to three years with rates set at 12% and 15%.

o?? Changes to Overseas Workday Relief: Extended from three to four years, but with significant restrictions.

o?? No 50% Income Relief for 2025/26: Previous relief is scrapped, signaling a higher tax burden.

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2. Trusts – Increased Regulation and Taxation

o?? End of Protected Trust Regime: UK-resident settlors will be taxed on the income and gains within offshore structures.

o?? Inclusion in FIG Regime: Offshore trust structures will be subject to the FIG regime for income and gains.

o?? Elimination of Excluded Property Trusts: Long-term resident settlors will no longer benefit from these trusts, replaced instead by a relevant property regime imposing a 6% tax every 10 years and exit charges upon status change.

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3. Inheritance Tax? – Widespread Adjustments

o?? Thresholds Frozen: The current ￡325,000 threshold is frozen until 2030, with the residence nil-rate band also unchanged at ￡175,000.

o?? Residency-Based System: Domicile for tax purposes will shift to a residency-based system, a favorable change for long-term expats.

o?? New Concept of Long-Term Residents: Individuals with 10 or more years in the UK will have their worldwide estates subject to IHT.

o?? Pension and AIM Shares in Scope: From 2027, pensions will be within IHT scope, and AIM shares will be partially relieved (50%) starting in 2026.

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4. Capital Gains Tax? – Rate Increases

o?? Higher CGT Rates: Effective immediately, rates are now 18% for the lower band and 24% for the higher band, with residential property gains remaining at 24%.

o?? Increased Private Equity Carried Interest Tax: Taxed at 32% beginning in 2025, with further changes expected.

o?? Reduced Investors’ Relief Cap:? Lifetime cap has been cut to ￡1 million.

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5. Additional Key Changes

o?? NICs for Employers Raised: Employer National Insurance Contributions are rising to 15% from 2025, with a lower starting threshold.

o?? Corporation Tax Steady at 25%: The corporation tax rate will hold at 25% for the duration of the Parliament.

o?? VAT on Private School Fees: Beginning January 2025, private school fees will be subject to a 20% VAT.

o?? New Anti-Avoidance Rules: Offshore structures will face tighter anti-avoidance measures from 2026 onward.

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Industry Reactions

Tax and wealth advisors have expressed significant concern over the government’s apparent lack of responsiveness to industry feedback, with leading experts warning of potential departures of wealthy non-doms from the UK. Estimates suggest that if even 25% of non-doms relocate, it could lead to a direct loss of over ￡3 billion in tax revenue—a potential strain on the UK economy.

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David Lesperance personal take

The recent UK tax changes are a game-changer, and if you don’t have a BackUp Plan, now is the time to move – but move with care to avoid unnecessary taxes. As someone who has spent years advising clients on finding favorable jurisdictions, I cannot stress enough the importance of planning strategically in light of these developments.

For many HNW individuals affected by these new rules, a swift, smart relocation to a more tax-friendly country may be the right choice, but it’s not just about getting out; it’s about getting it right.

Not all destinations will work for everyone, and choosing poorly can lead to significant and avoidable tax consequences. I recently highlighted 17 alternative jurisdictions, each with unique advantages for UK non-doms and HNW residents facing increased tax pressures. These are options where you can keep your quality of life, visit the UK regularly, and remain outside of the new tax regime.

Don't wait for the full impact of these tax laws to catch up with you. Take action now to secure your family’s future, ?with an eye on jurisdictions that respect both your wealth and your freedom.