What does the Spring Budget 2024 mean for non-doms in the UK?

Jeremy Hunt, the UK’s Chancellor of the Exchequer recently delivered his Spring Budget for 2024, the last fiscal event planned ahead of the general election later this year. The biggest announcement for global Indians is the change to the current regime for non-doms.??

I’ve spoken to two colleagues at Grant Thornton who specialize in this area, Nicholas Parkinson, and Katy Bond. They are respectively experts in tax for high-net-worth (HNW) individuals and expatriates coming to the UK for employment, so I asked them for their analysis about what’s changed, when it will be changing, and what it will mean for both groups.?

What’s changed??

Nicholas:?

Eligible individuals who opt-in will be exempt from paying UK tax on any foreign income and gains for their first four years of tax residence, provided they have been non-tax resident for the past ten years. This includes the ability for those individuals to remit those non-UK funds to the UK without any tax consequences.?

There are some potentially helpful transitional rules for existing non-doms who have already been in the UK for more than the four-year period:?

• the option to rebase the value of capital assets to 5 April 2019 values?
• a two-year window where non-UK income and gains can be remitted to the UK at a reduced 12% tax rate?
• a 50% exemption for foreign income (not gains) in the first year of the new regime (2025/26)?

The UK Government will also conduct consultations on a new residency-based Inheritance Tax (IHT) regime that includes discussing a ten-year exemption period for new arrivals and a ten-year 'tail-provision' for those leaving the UK. It has been confirmed that no changes to IHT will take effect before 6 April 2025.?

The Government have also announced they will respect certain IHT protections applicable to non-resident trusts settled before 6 April 2025 but from that date, it appears that non-UK income and gains arising in protected settlements will lose their current shelter from UK tax.?

Katy:?

Overseas Workday Relief (OWR) which provides valuable short-term relief for employees moving to the UK has been retained and its operation will be simplified. The relief is no longer conditional on retaining employment income outside the UK, which significantly simplifies the process for expatriates. However, the previous requirement for three years of non-residence has been extended to ten years.?

When will changes take effect??

Nicholas:??

Changes will come in from 6 April 2025, so unless there is a commercial or personal reason to take immediate action, we recommend that plans be built, but not implemented until there is greater certainty. This is likely to be after the general election later this year.?

Equally, some of the rules have time limits, so everyone must have a plan with possible timings to action as this will make it more likely you will make the most of any opportunities.?

Advice for High-Net-Worth individuals?

Nicholas:??

HNW individuals should review their circumstances in the round and not panic. With a careful plan, they should be able to maximise what could prove to be some quite valuable changes to the rules. With sufficient forward-planning the downsides to some of the rule changes might be mitigated.??

HNW individuals should use this time to involve any succession and estate planning into their considerations, and not just focus on the taxation of their investments and returns. Those individuals who will be affected by these changes are likely to have a limited period to plan effectively so should start immediately.?

Advice for expatriate professionals working in the UK?

Katy:?

Those who are coming to the UK for the first time should consider whether they qualify for overseas workday relief and understand the impact of this on their overall tax position. While greatly simplified, there are still some requirements to be aware of (eg tracking workdays) to ensure they can claim the relief.?

For those who have already been in the UK and claiming overseas workday relief, or who previously didn’t qualify for the relief but may do so under the new rules, they should seek advice to determine the extent to which the transitional provisions may impact and/or benefit them.??

Why choose the UK?

I’ve moved back to the United Kingdom from India recently and I can honestly say that I think it is the most open and diverse Western country. In many ways, this is its superpower and one of the reasons why the UK is such an attractive destination for both investment and talent. No matter how welcoming a society is culturally, it still needs a tax system that makes it appealing to the best international talent. I hope the above answers help to reassure those global Indians who are thinking of moving here or who are UK-based non-doms already.?

I want to thank Nicholas and Katy for their time and their advice. After speaking to them it’s clear to me that now is the time to start planning for the new regime, especially true if you are a non-dom already living in the UK. For those with a plan, there will likely be opportunities presented by the changes, especially once we are past the uncertainty in the lead-up to the general election.?

?#SpringBudget2024 #nondoms #taxplanning #UKtax

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