20240307-KPMG_Global-United_Kingdom_–_Spring_Budget_2024_End_of_the_Remittance_Basis_7页_264kb

U.K. Spring Budget 2024: End of Remittance Basis for Non-Domiciled Individuals

Overview of Changes

• Effective from 6 April 2025, the remittance basis for taxing non-domiciled individuals in the UK will be abolished and replaced with the Foreign Income and Gains (FIG) regime.
• The UK IN Budget introduced a further reduction in employee National Insurance (NI) rates.

Key Tax Changes

• Foreign Income and Gains (FIG) Regime:
  • From 6 April 2025, eligible non-domiciled individuals taxed under the FIG regime will only be subject to UK tax on UK-sourced income for the first four years of UK tax residence.
  • After four years, worldwide income and gains will be taxable.
  • Eligibility requires being non-resident for the previous 10 UK tax years, simplifying tax calculations by eliminating the need to keep foreign income offshore and avoid 'mixed fund' rules.
• Impact on Individuals:
  • Short-term residents (new arrivals after 6 April 2025) are expected to benefit from simpler tax rules, as there will be no UK tax on non-UK income brought to the UK.
  • Long-term residents may face higher UK tax liabilities due to the shift to worldwide taxation after four years, potentially triggering a £30,000 remittance basis charge for those with seven consecutive UK tax years residency before 2025.
• Transitional Rules:
  • For 2025/26, foreign income tax liability is reduced by 50% for individuals transitioning.
  • Capital gains tax rebasing and a temporary repatriation facility (TRF) at 12% are available for specific cases before full implementation.
  • Overlap and administrative changes are recommended for careful record-keeping.

National Insurance Changes

• Employee Class 1 NI rate reduced by 2 percentage points from 10% to 8%, effective 6 April 2024, following a previous cut from 12% to 10% in 2023.
• Self-employed Class 4 NI rate reduced from 9% to 6%, effective from 6 April 2024.
• Employer NI thresholds remain frozen until April 2028.

Other Tax Measures

• Income tax rates and bands unchanged.
• Capital gains tax on property for higher-rate taxpayers reduced from 28% to 24%, effective from 6 April 2024.

Conclusion and Recommendations

• Globally-mobile individuals and employers should prepare for the changes, as they could simplify taxes for short-term assignments but increase burdens for long-term residents.
• Further guidance and potential legislative updates are expected later in 2024, with possibilities for reversals in the next election year.