One of the most anticipated changes is the Capital Gains Tax (CGT) rate adjustment. The lower CGT rate will rise from 10% to 18%, while the top rate will increase from 20% to 24%. For Business Asset Disposal Relief and Investors’ Relief, the rates will be gradually increased to 14% from April 6, 2025 and will match the main lower rate of 18% from April 6, 2026. In addition, tax on carried interest will increase from 28% to 32%.
In terms of National Insurance premiums, there is no increase for employees, which is a relief for many workers. However, employers will see their liability increase by a few percentage points, which will affect overall employment costs.
The most significant changes are in the area of taxation for foreign domiciled persons. From April 2025, the UK will replace the concept of domicile with a residence-based taxation system. Until then, the normal remittance basis rules will continue to apply. The biggest beneficiaries of this change are individuals who become UK tax resident for the first time after April 2025. They will receive full exemption from UK tax on foreign income and capital gains for four consecutive tax years under the new 4-Year Foreign Income and Gains (FIG) regime. This exemption also applies to individuals who were UK tax residents before April 2025, provided they meet the 4-year residence criteria. Most foreign income will be excluded from taxation, with the exception of certain employment income which requires further consideration.
For those who do not qualify for the 4-year FIG regime but were previously taxed on a remittance basis, the Temporary Repatriation Facility (TRF) offers a favorable alternative. They can nominate amounts of previously unrepatriated foreign income and pay tax at a reduced rate of 12% for the first two years (2025-2026 and 2026-2027) and 15% for the final year (2027-2028). This arrangement allows individuals to bring any amount of income and capital gains into the UK with this reduced tax charge. It is possible to combine both the 4-year FIG regime and the TRF. For example, if the fourth year of tax residency in the UK falls in the tax year 2025-2026, the TRF can be used in the following two years, 2026-2027 and 2027-2028.
Individuals within the 4-year FIG period can also take advantage of Overseas Workday Relief (OWR), which applies to foreign income derived from employment duties performed abroad. OWR simplifies the previous requirements by eliminating the need to keep eligible income abroad.
Inheritance Tax (IHT) is also undergoing significant reforms. The UK is moving from a domicile-based IHT system to a residence-based system. Non-UK assets will be subject to IHT if the person has been resident in the UK for at least 10 of the last 20 tax years preceding the tax event. The status of excluded property for trusts will now depend on the residence status of the settlor of the trust at the time of the taxable event, rather than their domicile. The transitional provisions will apply to trusts created before April 6, 2025.
With respect to Capital Gains Tax (CGT) rebasing, individuals who were foreign domiciled before April 2025 and used a remittance basis may revalue their foreign assets to their value as of April 5, 2017 for CGT purposes upon disposition after April 6, 2025.
Individuals with foreign trusts can still take advantage of certain favorable treatment. These favorable regimes apply to income and capital gains within the trusts and with careful planning it is possible to avoid immediate UK taxation.
The British Chic and B2B Chic community invites you to an online hot-topic roundtable discussion for October 30th on the changes in the UK tax law. The event will take place on November 5 and will cover the impact of the new rules on tax burden, possible risks and optimization methods, including tools and suitable jurisdictions for relocation. The discussion will be held in Russian and English. It will start at 14:00 (collection from 13:30) on the Zoom platform. The cost of participation is £10. For registration and questions, please contact Igor on WhatsApp: +44 7770 453277
Participants include experts:
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