UK Inheritance Tax and Capital Gains Tax

Since Labour won the general election on 4th July this year they have already confirmed two significant tax changes:

1. Private school fees will now be subject to VAT at a rate of 20% from 1 January 2025. This was a key policy in Labour’s manifesto and they have wasted no time in implementing it.

2. From 6 April 2025 the non-dom tax regime will be abolished and replaced with a residence-based regime. This is still in consultation but the following is a brief summary of some of the key headlines:
New Arrivals
- New arrivals to the UK from 6 April 2025 will not be subject to tax on their foreign income and gains or distributions from non-resident trusts for their first four tax years of residence.
- During this time income and gains can be brought into the UK with no tax implications.
- This regime is only available to individuals who have not been a UK resident for the ten tax years prior.
- Individuals who have been tax resident for less than fours years at 6 April 2025 will be able to use the new scheme for the remainder of the four year period which started when they became UK resident.
- After the initial four years individuals will be taxed in the UK on their worldwide income and gains.
Current non-doms
- Current non-doms who are taxed under the remittance basis will be taxed on the arising basis from 6 April 2025
- There will be some transitional relief available to those currently considered to be non-doms
- There will be a rebasing of overseas capital assets and a temporary repatriation facility for foreign income and gains that arise before 6 April 2025.
Non-resident settlor interested trusts
- From 6 April 2025 the existing income tax and capital gains tax protection for non resident trusts will cease.
- Foreign income and gains arising from these trusts will be taxed on an arising basis.

Inheritance Tax

- The government are considering introducing a residence based test for inheritance tax.
- The new test will apply for chargeable events from 6 April 2025.
- Individuals who have been resident in the UK for 10 years will become subject to inheritance tax on their worldwide estate
- If an individual meets the ten year test then they will stay in the scope of inheritance tax in the UK for the next ten tax years irrespective of their residency

Labour have called a budget on 30 October 2024 and we are expecting confirmation of the above and further changes to the tax regime. These could include but are not limited to changes to Inheritance Tax and Capital Gains Tax.

Inheritance Tax, Tax advisory, Tax Consulting