How does the UK budget affect expatriates?

UK non-domiciled status abolished

The biggest announcement was the abolishment of the UK’s non-domiciled status. This reform will go through the consultation process, to come into effect in April 2025.

Much of this reform affects foreign nationals living in the UK and their tax liabilities. But the domicile regime also has a significant impact on an individual’s liability to UK inheritance tax; a major issue for British expatriates.

The UK government plans to replace these non-domiciled rules with a residence-based regime for inheritance tax. It will consult on a 10-year exemption period for new arrivals in the UK and a 10-year ‘tail-provision’ for those leaving the UK.

Other changes that may affect expatriates

The higher rate of capital gains tax for residential property gains will reduce from 28% to 24% from 6 April 2024.

The Furnished Holiday Lettings tax regime will be abolished from April 2025, eliminating the tax advantage for landlords who let out short-term furnished holiday properties over those with long-term tenants.

From April 2024 new legislation will restrict the scope of agricultural property relief and woodlands relief to property actually in the UK. A consultation will seek views on the implementation of the Organisation for Economic Co-operation and Development’s (OECD) amendments to the Common Reporting Standard (CRS2), the international tax transparency regime for the automatic exchange of information on financial accounts.

Tax allowances remain frozen

Many of the UK’s tax allowances have been frozen since 2021, instead of increasing with inflation, including the income tax personal allowance and higher rate threshold. As announced in previous budgets, the freeze is scheduled to last until April 2026 – and there was nothing in this 2024 budget to change this. Freezing allowances has a similar effect as raising taxes for the government. The personal impact for taxpayers increases considerably when freezing is accompanied by high inflation.

The inheritance tax nil rate bands are also frozen, which pushes more families into the IHT net and increases their inheritance tax bill.

British expatriates who retain UK assets could be impacted by some of these tax measures. If necessary, seek personalised cross-border advice for clarification and to establish if there is anything you can do to improve your position.

Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.

Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com