After the recent general election, the UK’s Labour Party is solidifying a set of policies that served as the foundation for its election campaign.

These policies are set to be confirmed during the upcoming Budget scheduled for 30 October 2024. This communication aims to provide a concise summary of the anticipated tax changes and, more importantly, offers insights into what individuals and businesses should consider now.

As policies evolve, we’ll keep you informed. Remember, tax planning remains crucial.

If you have specific concerns or need personalised advice, reach out to your usual Jerroms contact or speak to Kate Moon CTA, Tax Director at This email address is being protected from spambots. You need JavaScript enabled to view it. or 0121 693 5000.
 
Capital Gains Tax
Labour has always maintained that they will not increase national insurance, income tax or VAT, but have not touched on capital gains tax and some think their silence means changes are afoot.

Click below to read our recent communication focussing on Capital Gains Tax.

Additionally, hedge fund managers being liable to capital gains tax rather than income tax on their carried interest is also likely to come under fire – although if capital gains tax aligns with income tax, this will automatically be implemented.

Some business owners will look to accelerate any current sale negotiations currently taking place to ensure that deals are completed as soon as possible and before any potential change to capital gains.  On the other hand, other business owners will want to wait until the new Chancellor has had a chance to set out her new Budget and fiscal rules so they can plan accordingly.

Non-dom
Advantages of the new regime
At present, non-doms moving to the UK are taxed on their foreign income or gains if they are brought to the UK. Under the new proposed changes, non-doms will benefit from a special exemption, meaning all foreign income and gains are exempt from UK tax charges regardless of whether brought into the UK or not.

The aim of this is to encourage wealthy non-doms to introduce their overseas income into the UK economy and encourage those wealthy individuals to choose to live in the UK. Similar regimes are already in place in various other jurisdictions, although interestingly, Portugal closed their regime on 31 December 2023.

Non-UK structures, such as trusts and companies are expected to retain the benefit of tax-free roll-ups of income and gains, although details have not yet been confirmed.

Who will benefit?
The new regime would be attractive for any non-doms expecting to chystalise a large gain (for example on the sale of a business or other asset) if they were to realise it within the first 4 years of residency in the UK.

It is thought that there will be incentives introduced for existing non-doms to bring their overseas assets into the UK, although details of this have not yet been announced.

Inheritance Tax (IHT)
Changes to inheritance tax have been mooted for the last few years, and no changes have yet been made. It is clear that the nil rate band (the level at which you would pay inheritance tax on death) of £ 325,000 (currently fixed until 2028) is no longer reasonable given the value of the average estate, but there is sadly no mention of increasing this.

It’s been suggested that the rate of inheritance tax will increase from its current 40% to a higher %, although we see this as unlikely.

It seems more likely that there will be restrictions on the valuable reliefs that apply, such as business relief or agricultural land – although a withdrawal of business relief could have catastrophic consequences for the alternative investment market (AIMs) market, as investments into AIM often benefit from business relief, so a withdrawal of this will make those investments less desirable.

Another area being considered is lifetime gifting. Under the current rules, if you make a gift to another individual and live 7 years, that gift is outside your estate for inheritance tax purposes and therefore exempt.  A lot of European countries charge lifetime inheritance tax on gifts when they are made, and bringing in a similar regime in the UK is being considered.

Read our latest insight on IHT solutions and common scenario planning:
Read more

Stamp Duty Land Tax (SDLT)
Labour has been fairly quiet on the SDLT front, although an increase in the additional rate paid by non-UK residents purchasing UK property is being considered.

Wealth or Mansion Tax
Labour has been quick to reassure the public that it would not be implementing a wealth tax; however, it is not mentioned anywhere within their manifesto which has given rise to suspicion that this remains a possibility depending on the growth in the economy over the next year or two.

Changes to VAT on Independent School Fees
We know that VAT accounting is complex but even more so for a school providing taxable services and VAT-exempt income. Independent Schools can VAT register with effect from 30 October 2024.

The “perk”, if you can call it that, is the ability to recover VAT on expenditure. If the school VAT registers from 30 October 2024, the VAT on costs incurred prior to 1 January 2025 are also recoverable.

If the school VAT registers from 1 January 2025, this additional VAT recovery could be lost.

Any expenditure relating to property builds or large refurbishments (over £250,000) qualifies for historic VAT recovery. Thus, a ten-year review of accounts to identify when such project costs were incurred can result in a huge historic VAT claim.

Jerroms Miller has a huge amount of expertise in this area. We have already helped schools make VAT claims in excess of £1.8 million and secured £620,000 VAT savings on prepayments of fees beyond 1 January 2025.

If any of the above issues affect you, please reach out to Daphne Hemingway, VAT Director at This email address is being protected from spambots. You need JavaScript enabled to view it..

We may be able to help you plan for some of the potential changes. Of course, more details will be available after the budget, and we will keep you informed then.
 
When are these changed likley to happen?
The non-dom rules are due to come into force on 06 April 2025.

Changes to capital gains tax are likely to be the quickest to implement and could come as soon as budget day in early October 2024.

Inheritance tax changes typically take longer, as the legislation is far more complicated and various consultations would be required.

What should you do?

• Get in touch about anything you feel may affect you.
• Clients that hold UK assets with a capital gain, or are in the process of selling such assets should get in touch to see if any planning can be undertaken pre-budget to minimise the impact of any increase in rates – for example, crystalising gains within share portfolios and reinvesting the proceeds into new stocks and shares (subject to investment advice).
• Clients that are or will be considered non-dom should get in touch to discuss their position before the changes are implemented in April 2025, to ensure that any action required can be implemented before the new rules come into force.

Disclaimer: This is a general summary based on the predictions and views known to us and should not be relied upon. If you consider that you may be affected, please contact us for specific advice tailored to your circumstances.