The UK Chancellor has delivered her first Budget ending months of speculation. Much of what was announced with respect to private wealth was expected, although there are a few surprises.

In this overview we set out some key measures impacting individuals. We will be digesting the detailed announcements and draft legislation and bringing updates and our opinions in due course.

The changes are far reaching. Please do not hesitate to get in touch with us to speak to us about the changes.

Capital Gains Tax

CGT has increased as expected. Although surprisingly there is no change to CGT rates for residential property disposals. This remains at 18% and 24%.

The changes that have been made are:

1. Basic Rate 10% will increase to 18%
2. Higher rate 20% will increase to 24%

These changes are effective immediately from 30 October 2024.

Inheritance Tax

Nil rate band

The nil rate band thresholds are frozen until at least 2030. This impacts UK individuals but also international individuals with UK assets.

The standard nil rate band remains at £325,00 and the residential nil rate band is at £175,000. The freeze means that more and more estates will continue to be included into the inheritance regime as values of assets such as properties rise.

Business and agricultural property

From 6 April 2026:

1. 100% relief will be available for assets in the business or agriculture up to £1m.
2. Any assets above £1m will attract 50% relief.
3. Shares in companies such as those in AIM will qualify for 50% relief.
4. The new changes apply to trusts holding qualifying assets which means on the next 10-year anniversary there could well be a tax liability which has not been previously incurred.
5. The new £1m allowance will apply to any trusts established on or after 30 October 2024.

Individuals and trustees with such assets need to review their new tax liability.

Pensions

The potentially big impact to families will be the announcement to tax pensions on death. Whilst transferred pensions will no longer qualify for reliefs, the government has begun its consultation to tax all pensions placing an obligation on pension providers to report the pension and pay any tax due. Pensions have long been a tax efficient method in providing security for the taxpayer in the later years of life whilst providing an effective method to transfer wealth to family members in a tax efficient manner.

Many individuals will now be caught by within the inheritance tax net and their estate planning needs to be reconsidered.

Non dom changes

The changes announced were largely expected and now we have much needed detail. The reforms change the foundations of rules that are hundreds of years old. The changes have wide reaching implications and require serious consideration.

UK resident individuals who are not UK domiciled or are UK deemed domiciled, individuals who are planning on becoming UK resident and trustees of trusts with UK connections need to review their position in light of the new rules.

Inheritance tax – change to a residence-based system

UK assets are always within the scope of UK inheritance tax. Liability to inheritance tax in respect of non-UK assets currently depends on domicile with an individual becoming deemed once they are UK resident for 15 out of 20 tax years.

From 6 April 2025, residence and not domicile will determine liability to worldwide inheritance tax. An individual will be subject to inheritance tax on a worldwide basis if they are a ‘long-term resident’.

An individual will be a long-term resident if they have been resident in the UK for 10 out of the last 20 years. If a long-term resident ceases to be UK resident, they will be within the scope of inheritance tax on a worldwide basis for 3 to 10 years despite not being UK resident (the “tail”). Broadly speaking there is a minimum tail of 3 years where someone has been UK resident for 10 to 13 years and the tail increases by one tax year for each additional year of residence. For those resident in the UK for more than 19 years, the tail is 10 years.

CGT and Income Tax

As the government promised, the remittance basis regime will be abolished from 6 April 2025. The regime did not subject non-UK income and gains that were kept outside the UK for up to 15 years.

the remittance basis will be replaced with the foreign income and gains regime. Essentially, individuals will now have 4 years in which foreign income and gains are not taxed in the UK. They will be able to bring this into the UK without further UK tax implications. Distributions from non-UK trusts to UK resident beneficiaries will be given the same treatment.

To benefit from the new regime, taxpayers need to have been non-UK tax resident for 10 consecutive years prior to claiming to be taxed under it.

There are transitional provisions.

The Temporary Repatriation Facility allows those who have previously claimed the remittance basis and have untaxed FIG to the UK at a reduced flat rate. The Temporary Repatriation Facility will be available for 3 years, from 6 April 2025 to 5 April 2028.

Foreign assets individually held by those who currently claim or have claimed the remittance basis can be rebased to 5 April 2017.

Trusts

There are significant and far-reaching changes to taxation in relation to trusts with UK resident settlors and/or beneficiaries.

Currently, a trust is not subject to inheritance tax where non-UK assets are settled by a non-UK domiciled settlor. This excluded property status is fixed. However, changes announced mean that the inheritance tax treatment of trusts settled with non-UK assets will depend on whether the settlor is a long-term resident.

This will mean a trust can move in and out of the scope of inheritance tax depending on the settlor’s residence position. This covers the position regarding discretionary trusts; the inheritance tax position of certain interest in possession trusts will depend on whether the settlor and life tenant are long term residents.

These changes have a profound impact on the UK taxation of trusts. There are potential charges on ten-year anniversaries and capital payments but also exit charges when a settlor ceases to be long-term resident.

Where a settlor and/or a beneficiary receives a benefit from an offshore trust and has made a claim under the new foreign income and gain regime, there should be no tax on income and gains, However, this will not be matched against and therefore not deplete the relevant pools.

There are some planning opportunities. Where beneficiaries can take advantage of the temporary repatriation facility, foreign income and gain that arose before 6 April 2025 can be matched to benefits from 6 April 2025 to 5 April 2028.

SDLT

Property investors are clearly on this government’s radar.

SDLT payable on additional properties will now increase to 5% effective from 30 October 2024 at its lowest rate (this previously being 2%).

Implications for SME’s

Whilst one would say these taxes do not impact private wealth, directly maybe not, but indirectly – absolutely yes. The individuals impacted by these changes are often entrepreneurs. Increased costs to the running of their businesses have a direct implication on their profit margins and ultimately their growth.

Inherently, business owner clients will want to speak to us about efficiently structuring any financial release from their business on an on-going basis and if and when they decide to exit upon the business.

Get in touch

It is clear that the announcements will have a wide-reaching impact. It is important that you review your position to see what planning should be undertaken.

We will be analysing the rules ad draft legislation and keeping a watching brief on the draft legislative process to provide further insights.

Please do not hesitate to contact us to discuss the changes further.

Sangeeta Rabadia and Hilesh Chavda

Partners in Private Wealth.