Explore how the new Labour government's tax policies will impact UK residents and non-doms. Acquarius provides expert financial insight to help you stay informed.
It became evident, during the first few days of the new administration, that the Prime Minister is a man in a hurry. Without seeming to take a breath, he appointed his new cabinet, embarked on a whirlwind tour of the Home Nations, and attended NATO’s 75th anniversary summit in the US. It is safe to assume then that other departmental plans will also be pursued rigorously by his team and, to use one of the new government’s frequently used phrases, “at pace”.
Significant changes are in store for private clients, particularly those who are, or are considering becoming, UK residents. These include the well-known non-domiciled individuals, or “non-doms”. The Chancellor of the Exchequer, Rachel Reeves, will present Labour’s budget in September – its first in fifteen years. We can anticipate much of what is planned based on their election manifesto, and other assumptions about Labour continuing or extending the previous government’s already announced changes. The devil, as always, will be in the detail.
It is tempting to simply pack a bag and head for the beach until September. After all, it is holiday season, and nothing much happens in summer, right? Everyone is away anyway so one might be forgiven for thinking about taking a break until the autumn.
At Acquarius, we adopt a markedly different attitude. For us, the summer of ’24 will be a busy one. While we cannot be sure what measures will be included, we have a pretty reasonable idea of the broad approach. Instead of ignoring the likely impact, why not get in touch with us so we can at least start reviewing your affairs or those of your clients? By doing so, we can be prepared when the changes are announced. By opting for a September Budget, it is possible that significant change will affect UK taxpayers, including non-doms, from the next tax year – that is in April 2025. Although the implementation date for some measures may slip, it is far better to be ready for whatever proposals emerge in the coming months.
We already know a fair amount about Labour’s plans aimed at non-doms. The concept of domicile used in tax planning will be replaced by a four-year residence-based plan that allows for free non-UK income and capital gains during that initial period only. From the fifth year, liability to such tax on a worldwide basis will apply. Moreover, inheritance tax on assets anywhere in the world, including those in non-UK structures, is in the plans and this may continue to apply for ten years after someone ceases to be UK resident. The use of offshore settlements (including excluded property trusts and foundations) is also likely to be severely curtailed. There may be some relief, such as the ability to import historic income and capital gains at a reduced rate of tax, but as yet, nothing is certain.
One might be forgiven for believing that there is nothing to be done, at least in the next few weeks and months. I take a different view and do not think that any planning we put in place will prove futile. Whilst we cannot predict that much too far ahead, there are actions we can take now under the current rules that will remain “future proof”.
Every case is unique as I constantly remind Acquarius’ clients and their advisers. Asset type and location, including how they are currently held, will all be important factors. So too is the notion that the current “owner” may not need, or wish, to retain a beneficial interest in these assets. Planning opportunities might then present themselves, even in these uncertain times. Careful structuring, which may include using an offshore life bond, could provide the optimum solution. Together with our hugely qualified UK taxation partners and in collaboration with a fully regulated global financial services group, we have developed a comprehensive, robust series of solutions for our clients, regardless of the challenges posed by their individual circumstances.
Of one thing I am certain; the time to act is now. Get in touch with me at any time for an initial, no obligation, discussion.