Temporary UK residence regime (TUKRR) or UK Flat Tax Regime (UKFTR) or Four Year FIG Regime (FYFIGR)?

As far as Spring Budgets go, there was not much in terms of rabbits being pulled out of hats as most of the main announcements had been widely trailed in the media over the weekend. Although bizarrely the main personal tax change on the abolition of the non-dom regime is still so fresh out of the packet that the new regime doesn’t even have a name (see my suggestions above)! It was certainly a content heavy Budget with the Chancellor Jeremy Hunt’s speech lasting for over an hour (his longest yet) with a raft of announcements many of which were pretty minor and the majority not happening in this Parliamentary session. From a personal tax perspective, there is a lot to digest.

Firstly on National Insurance contributions, from 6 April 2024 there will be a 2% cut to both employee and self-employed national insurance which the Chancellor said will mean an additional ￡450 for the average employee and ￡350 for the self employed every year. Jeremy Hunt said that “making work pay” was of fundamental importance and is looking to address the unfairness of the double taxation of work. Therefore when they can afford to do so, his ambition is to continue to cut national insurance so we “truly make work pay”. With their limited headroom this is unlikely under the current government but definitely sets out their intended direction of travel.

The Chancellor also addressed the cliff edge in respect of child benefit by increasing the earnings threshold from ￡50,000 to ￡60,000 from 6 April 2024 as well as increasing the taper interval from ￡10,000 to ￡20,000 to hopefully smooth out the marginal rates. Jeremy Hunt recognised that there was still an unfairness as child benefit is measured on individual rather than household income and therefore announced a consultation to move to a household income threshold from April 2026. Provided that this is not administratively complex, this is likely to be welcome news for families with joint earnings over ￡60,000.

Property tax was in the spotlight with an abolition of the multiple dwellings stamp duty land tax relief for transactions completing on or after 1 June 2024, ?as well as the abolition of the furnished holiday letting regime from 6 April 2025. Furnished Holiday lets currently benefit from additional tax reliefs such as unrestricted mortgage interest relief, sideways loss relief and enhanced capital allowances as well as the profits being treated as earnings for pension purposes. The Chancellor’s view is that this regime is distorting the long-term lettings market and therefore hopes that abolishing the regime will address this. The additional capital gains tax rate on residential property will also be cut from 28% to 24% with effect from 6 April 2024 again to address these property market distortions - an unexpected announcement.

There was something for savers too with the introduction of a UK ISA with its own ￡5,000 limit as well as a British Savings Bond delivered through NS&I with a guaranteed return fixed for 3 years. We await much of the detail on this and how it will work in practice but the aim is to encourage investment into UK business.

The main announcement was the abolition of the non-dom regime which is due to come into effect from 6 April 2025 which is estimated to bring in almost ￡10bn of additional revenue by 2029. For new arrivals to the UK post April 2025, they will be into the new regime (currently with no name) which will be a residence based test that will allow new arrivals to only pay UK tax on their UK source income and gains for the first 4 years. The key difference from the current regime is that there will be no UK tax charge for bring foreign income and gains (known as FIG) to the UK within that 4 year period.

For those who are still or have previously benefited from the non-dom regime, they may wish to take advantage of the Temporary Repatriation Facility (TRF)?which will allow FIG to be brought the UK within a 2 year window with a 12% UK tax charge along with a 2019 rebasing. This is likely to be popular with some but others will need to look at the detail – for example what happens to non-UK taxes already suffered on the FIG.

For those with protected trusts, their income tax and capital gains protections will come to an end on 6 April 2025 which shows that these announcements have a bit more teeth to them than perhaps had been expected.

The big question when looking at abolishing the non-dom regime is what happens to inheritance tax? In the UK, inheritance tax for both UK domiciles and non-UK domiciles is determined by 2 things – the location of the asset and the domicile of its owner. Abolishing the non-dom regime which only deals with income tax and capital gains tax does not in itself change the scope of inheritance tax. Somewhat surprisingly, a consultation was announced in the Chancellor’s Spring Budget to abolish the term domcile and move inheritance tax to a residence based test with a suggested 10-year residency window. This is great news for Brits retiring abroad who have previously never been able to get themselves outside the scope of UK inheritance tax even if they have moved overseas long-term without losing their UK domicile status which is ?notoriously difficult to do. These proposals would mean that their non-UK assets would be outside the scope of UK inheritance tax once they have lived outside the UK for more than 10 years. For long term UK resident non-doms however these proposals are likely to be less good news. Currently once they leave the UK, their non-UK assets are outside the scope of UK inheritance tax after 5 years – this consultation looks to extend the tail to 10 years given that domicile would no longer be relevant. I suspect that we have not heard the last about domicile and its interplay with inheritance tax and it may become a point of difference between the Conservatives and the Labour Party given that the main non-dom regime will be no more.

Overall a raft of measures announced by the Chancellor in the Spring Budget which definitely felt like a warm up event to the general election. No unexpected big give aways in addition to the NIC cut although this was not unexpected given the limited headroom but the Chancellor did show that he is listening, for example with the proposed changes to the child benefits thresholds. With lots for tax advisors like me to read and absorb in the coming weeks and a Tax Administration Day on 18 April still to come, I would say that this was a Budget of lots of detail but perhaps limited immediate impact for many. As someone who has studied and advised clients on the remittance basis for years, it feels like the end of an era perhaps cut short sooner than expected.