Spring Budget 2024 - Personal and Employment Taxes

The UK Chancellor of the Exchequer delivered the government’s 2024 Spring Budget on 6 March. In an election year, speculation had been high around the possibilities of tax cuts and giveaways. However, the largely unexpected  “showstopper” was the announcement of the abolition of the UK current “non-dom” tax regime.

 

Changes to the “non-dom” regime

Non-UK domiciled individuals (non-doms) are individuals whose permanent home, or domicile, is considered to be outside the UK. Currently, non-doms who are UK residents can benefit from a favourable tax regime, which allows them to opt to use what is known as the remittance basis of taxation.

As opposed to other UK resident individuals who pay UK tax on their worldwide income and gains, in essence, the remittance basis of taxation works such that non-doms can:

• pay UK tax on their UK income and gains, and
• only pay UK tax on their non-UK income and gains when they are remitted, or brought to, the UK. 

Concerns have long been expressed that this system is unfair and encourages the offshoring of foreign income and gains.

The current regime, and the application of the remittance basis of taxation, is being abolished from April 2025.

A new regime will be introduced for individuals arriving to the UK (and who have been non-UK resident for a period of 10 consecutive years) under which:

• no UK tax will be paid on any foreign income or gains for a period of 4 years (whether or not the same is brought to the UK), and
• UK tax will be paid on any foreign income or gains following that first 4 year period.

Transitional provisions are to be introduced to mitigate the impact of the new regime on existing non-doms, in particular, the government will introduce:

• an option to rebase the value of capital assets to 5 April 2019 levels;
• a temporary 50% exemption for the taxation of foreign income for the first year of the new regime, being 2025-26; and
• a two-year Temporary Repatriation Facility to bring previously accrued foreign income and gains into the UK at a 12% rate of tax.

 

Cuts in the rates of employee and self-employed NIC

From 6 April 2024, the main rate of employee NIC is being cut from 10% to 8%.

Additionally, from 6 April 2024, the main rate of self-employed NIC is being cut from 8% to 6%.

There was some signalling of further cuts, or reforms, to NIC in the future, but no substantive detail was provided.

 

Umbrella companies

The government has announced that it will provide an update on the recent consultation on tackling non-compliance in the umbrella company market at Tax Administration and Maintenance Day (on 18 April), with additional guidance to support workers and businesses to follow later in the summer. Further details will be provided once available.

 

Should you have any queries on the Spring Budget, please reach out to your usual UK tax contact or the authors.

Richard Johnson, Legal Director

David Smith, Partner