Private Client: Pre-budget Analysis and Commentary: Non-Domiciled

Ashley Stoller, Private Client Tax Manager recently joined LB Group in May and supports Clare Eve and Private Client team with business development, advisory work and providing a stellar service to our clients.

As you may be aware, Rt Hon Rachel Reeves announced an Autumn Budget will take place on Wednesday, 30th October 2024.

Ashley has provided a pre-budget review of the proposed changes to non-domiciled individuals that could end excluded property trusts, affecting long-term UK residents.

It has been strongly suggested that tax increases are on the horizon in the autumn budget, emphasising the need for honesty regarding the challenging decisions that need to be made. There is speculation that Labour may target other taxes, such as capital gains tax and inheritance tax.

HM Treasury have released a policy paper on the proposed changes to non-doms. For the most part it is as expected. A U-turn on the conservative suggestion of a 50% reduction in FIG subject to tax for the first year is not earth shattering. As expected, excluded property trusts are coming to an end but the wording around existing EP trusts is interesting:

“The government recognises that trusts will already have been established and structured to reflect the current rules, so is considering how these changes can be introduced in a manner that allows for appropriate adjustment of existing trust arrangements, while ensuring that the treatment of all long-term residents of the UK is the same for IHT purposes.”

On first read this looked as though grandfathering provisions would apply, however on second read “whilst ensuring that the treatment of all long-term residents in the UK is the same for IHT purposes” does add a layer of uncertainty as how can long term residents benefit from grandfathering provisions when all long-term residents are treated the same. It will be interesting to see where this eventually lands.

Lots of other interesting proposals included the potential ability to clean up all undistributed income and gains from offshore structures at a temporary lower rate of tax as part of the TRF (virtually no information, but my inference from the reading).

It is a shame that there will be no formal consultation on moving to a residence-based system for IHT but hopefully the pre-election engagement sessions yielded some fruit!

There is also the ability to consult on the impending changes, there is a forum to provide your representations. This is open to all – 1. Executive Summary | Autumn Budget 2024 / Spending Review – Stakeholder Representation (smartsurvey.co.uk)

If you have any questions related to this topic or regarding the Autumn budget then please do reach out to the private client team who will assist you.

As ever before, the Group will be following updates on the Autumn Budget and further clarity on these proposals which will be shared on our website, social media and internal channels. We are also looking to host an Autumn Budget “Watch Party” across each office, including showing live coverage of the Budget on Wednesday 30 October, within office meeting rooms throughout the Group. Please look out for further details on this in the coming weeks.