Category: News

Action Stations for Private Clients and Businesses

Original recording: Friday 1st November

Join the Sanctoras team for an in-depth analysis of the October Budget.

With some major announcements in the August 2024 Budget, this session delves into how the changes may impact businesses, high-net-worth individuals, and professional advisors alike.

Managing Partner, James Heathcote was joined by our Head of Private Client Advisory, Richard Thomson-Curtis, and Head of Corporate & Business Advisory, Charlie Kelleher.

The team unpacked the key changes, explored their implications, and offered expert opinions on how best to navigate the evolving landscape.

This webinar is ideal for:

• Other professional advisors (lawyers, accountants, etc.)
• Business owners and entrepreneurs
• High-net-worth individuals and family offices

Key points

• Capital Gains Tax increased to 24% with immediate effect
• Inheritance Tax reliefs for agricultural and business assets reduced
• Stamp Duty Land Tax surcharge on acquiring second homes increased from 31 October
• Non-domicile regime for tax to be scrapped and replaced with a residence-based test
• Trusts established by non-UK domiciled settlors to lose all tax protections
• Employer’s National Insurance increasing to 15%

Overview

After months of speculation, rumours, leaks, briefings and row-backs, tax advisors up and down the land woke up this morning safe in the knowledge that it was almost all over! All that was left was to place bets on the length of the speech (82 minutes), what the Chancellor would be drinking (water), and how many times she says “black hole” (I stopped counting!).

In the first Budget delivered by a Labour Chancellor of the Exchequer since the late Alistair Darling in March 2010, Rachel Reeves delivered her Budget this afternoon promising to “Fix the Foundations to Deliver Change”.

Speaking for over an hour, the Chancellor painted a similar picture to the relatively bleak one we have been seeing since the election in July; of a “black hole” and of “restoring stability to public finances”. Somewhat hamstrung by their manifesto commitments, the Chancellor was keen to make it clear that this Budget was not a return to austerity, but responsible, sustainable announcements which lead to growth.

As expected, this was a Budget which raised taxes, with £40 billion of tax increases announced which included, as endlessly speculated in the media, announcements concerning capital gains tax, inheritance tax and the taxation of non-UK domiciled individuals as key focuses of the Chancellor’s speech.

Updates for Private Clients

As promised in the Labour Party’s election manifesto, the Chancellor reiterated the commitment to not increase the rates of VAT, Income Tax or employee National Insurance (though much criticism has been levied on what many see as a somewhat disingenuous omission of the employee qualification during the election campaign).

The income tax thresholds (the ‘bands’ within which each tax rate is applied) will not be extended beyond those previously announced. From 2028-29, these will increase annually in line with inflation.

Capital Gains Tax (“CGT”)

The potential changes which attracted the most attention in the press were to CGT. The Chancellor did not go as far as some rumours thought that she would, with the lower rate of CGT being increased from 10% to 18%, and the higher rate being increased from 20% to 24%. It was only from April 2016 that the rates of CGT were reduced from 18% and 28% respectively, so today’s increases are nowhere near the ‘unprecedented’ rises that had been feared. However, the new 18% and 24% rates apply immediately to any disposals on or after 30 October 2024.

Against the strong backdrop of rumours of its abolition, Business Asset Disposal Relief (“BADR”) will be retained at its current lifetime allowance of £1 million. Along with the lower rate of CGT, the BADR tax rate will increase, albeit over two years, with the 10% rate being retained for the remainder of this tax year, 14% in 2025-26 and up to 18% in 2026-27.

Hitting another manifesto commitment, the rate of CGT applied to Carried Interest (certain payments made to private equity executives) will be increased to 32% from 6 April 2025, with further reform to Carried Interest announced from April 2026, by bringing Carried Interest within the scope of income tax.

Far from bringing any form of simplification, it means the UK still has four rates of CGT – 10%, 18%, 24% and 32% – with further adjustments over the next two years.

Inheritance Tax (“IHT”)

As with CGT, the Chancellor did not go as far as some rumours suggested as regards changes to IHT, noting that only 6% of estates were liable to pay IHT.

Retaining the Residential Nil Rate Band was a little unexpected; however, this, and the Nil Rate Band thresholds will be frozen until at least April 2030, meaning the impact of inflation will continue to erode the real-terms value of these thresholds. “Unspent” pensions that are inherited (which are currently not within the scope of IHT), will also be brought into the scope of IHT.

IHT reliefs were firmly within the Chancellor’s sights as well this afternoon, with reforms to both Agricultural Property Relief (“APR”) and Business Property Relief (“BPR”). From April 2026, the first £1m of combined APR and BPR-qualifying assets will continue to attract 100% IHT relief as they do at present. For any value in excess of this £1m threshold, IHT will apply, although with a 50% relief – meaning an effective 20% rate of IHT above £1m.

Finally, in another tweak to BPR, shares listed on AIM (and other recognised stock exchanges where shares are treated for BPR purposes as being “unlisted”) will attract relief at a reduced rate 50%, rather than 100% as they do currently. This does not go as far as many had expected, preserving at least some IHT relief on AIM and similar shares (though whether they remain as attractive purely for IHT purposes remains to be seen).

Stamp Duty Land Tax

Stamp Duty Land Tax (“SDLT”) was subject to a single announcement with an increase in the surcharge for second homes by 2% (to 5%) from 31 October 2024, and the rate on which corporate bodies pay SDLT on residential properties costing more than £500,000 increasing to 17%. Note that this only applies to property in England and Northern Ireland, as Scotland and Wales have separate land transaction tax regimes. 

As was expected, the ‘holiday’ for the extended SDLT bands will not be extended, and as such the 0% band will revert to £125,000 from 1 April 2025

It was expected that there would be far wider reforms to SDLT, so the single announcement, and the immediacy of its implementation of the higher surcharge is somewhat disingenuous, given that the speed at which property transactions move will result in very few transactions being able to ‘escape’ the higher rate.

Other updates for Private Clients

• In a surprise move the Chancellor announced that the recent freezes, and 5p per litre cut to Fuel Duty would be retained, against the background of a high cost of living, and ongoing global uncertainty.
• As was expected, the triple lock on the State pension will be retained next year, resulting in an increase in the new and old state pensions by 4.1% from April 2025.
• Finally, and away from taxation, it was announced that the National Living Wage for over 21s will rise by almost 7%, to £12.21 per hour from April 2025, giving lower-paid workers a much needed boost. Rates for 18-21 year olds will be increased by 16%, with the ultimate aim of having a single Living Wage rate for adults.

Updates for Non-UK Domiciled Individuals

The Chancellor announced that the current regime of the remittance basis of taxation will be abolished from 6 April 2025, and the “outdated concept of domicile” be removed from the UK taxation system. This was no surprise and has been known for a considerable time, though we are pleased that draft legislation has today been released.

In place of the current “non-dom” regime as it applies to tax, the Government will introduce a new residence-based approach for IHT and transitional measures for the taxation and remittance of non-UK income and gains – the “FIG (Foreign Income and Gains) regime”. At first reading, this appears to be broadly in line with that announced by Jeremy Hunt in March 2024, although with some tweaks – namely that the Temporary Repatriation Facility, allowing remittances of non-UK funds to the UK at a favourable rate, will be extended to 3 years, and its scope will be expanded.

Alongside the Budget, the Treasury released a technical note and draft legislation detailing the changes that are proposed to the taxation of non-UK domiciled individuals. Rather disappointingly, this confirms that there will be no ‘grandfathering’ of existing structures from the proposed changes and that, from April 2025, foreign income and gains arising in settlor-interested trusts will be taxable on UK resident settlors as they arise, where the settlor does not qualify for, or does not claim, the new FIG regime.

Changes to IHT will also be accelerated, and will be introduced from April 2025 (at the same time as the introduction of the FIG regime). From 6 April 2025, an individual will be within the scope of UK IHT on their worldwide assets if they have been resident in the UK for at least 10 of the 20 tax years prior to the tax year in which a chargeable event (e.g., death) occurs.

To fall outside the scope of UK IHT, an individual would be required to be non-UK resident for at least three years (depending on how long they have been resident in the UK and whether they subsequently return to the UK).

We expect to learn more over the next few months, as draft legislation is released, amended and enacted, and we will be releasing a separate detailed briefing on this shortly.

Updates for Businesses

This Budget was a little on the quiet side for businesses, with Rachel Reeves having previously discussed the need for stability for British businesses. As such, the Chancellor announced that a Corporate Tax roadmap will be published shortly, which will allow for businesses to plan for any future changes. At the same time, she announced that the rate of Corporation Tax will be capped at 25% for the life of this Parliament; full expensing will be retained; the Annual Investment Allowance will be retained at £1 million; and the Research & Development tax credit will be retained at its current rate.

As was rumoured in the media over the last couple of weeks, from April 2025 the rate of employer National Insurance will be increased by 1.2% (bringing the rate to 15%), and the earnings threshold will be lowered to £5,000 per year. At the same time, the employment allowance will be increased from £5,000 to £10,500.

Although the higher employment allowance will be of assistance to small businesses, those with larger employer National Insurance liabilities will feel a considerable hit. Much has been made in the press of the potential knock-on effect to employees, and any impact remains to be seen.

Other Announcements

Further to announcements by Jeremy Hunt in Autumn 2023, reiterated in his 2024 Spring Budget, it was announced that further investment would be made in HMRC, both in hiring 5,000 more staff, and in improving and modernising HMRC’s systems, to enable the UK’s tax authorities to collect unpaid tax liabilities, and thereby reducing the tax gap. 

Additionally, the interest rate on unpaid tax will also be increased by 1.5% from 6 April 2025.

Closing Thoughts

Although clearly constrained by the ongoing global uncertainty, current Government finances and the continuing cost of living crisis (and Labour’s own manifesto commitments), the Chancellor did not go as far in a number of areas as was expected.

Increases to CGT rates were expected, but were ultimately not as substantial as rumoured and speculated. Similarly, changes to IHT and associated reliefs were expected, but were not as substantial as they may otherwise have been. However, this does not mean that more significant changes will not follow in due course once the Government has assessed the behavioural and economic impacts of the measures announced today.

Within the Budget, the Chancellor did include some, albeit limited, good news for taxpayers, with the continuing freeze in Fuel Duty, and the un-freezing of tax thresholds from April 2028. Whether this will be enough to turn the tide on a general sentiment of negativity – perpetuated in considerable part by the Government themselves with extensive reference to “difficult choices” and a “painful” time to come – remains to be seen.

Many of today’s announcements will require urgent consideration or assessment of individual clients’ circumstances, and the time to take affirmative action has now arrived. Please get in touch with your usual Sanctoras contact, or any of the team, if you have any questions about the Chancellor’s Autumn Budget, or how any of the announcements may affect you.

Webinar

You can now register for our interactive webinar on Friday 1st November (10am GMT, 2pm GST) to get further insight and ask any burning questions from Richard, James and Charlie.

REGISTER HERE

For those in Dubai, keep your eyes on our social media for details of an in person session on Friday 15th November.

As summer turns into autumn, we’re speaking to a growing number of HNWIs who are considering a move overseas. Important to note that these are not just the non-doms who will be impacted by the proposed changes to the remittance basis, but UK entrepreneurs are also increasingly looking to move abroad.

It’s interesting to read that this is not just our experience here at Sanctoras, and that HNWIs and UHNWIs are indeed increasingly upping sticks and heading elsewhere. The Private Wealth Migration Report from Henley Global asserts that 2024 will be the most significant year ever for HNWI relocations, with 128,000 moves estimated to be made by the end of December.

The UK is not leading the way here, with China currently seeing the greatest outflow of HNWIs, with an estimated 15,200 individuals leaving China in 2024 (the UK is estimated to have c9,500 departures).

Perhaps unsurprisingly, the UAE is estimated to be the greatest beneficiary of these moves, with c6,700 individuals predicted to move to the UAE this year. With relatively stable weather, and a favourable tax regime, this inflow is likely to only grow in future years.

As Rachel Reeves finalises the announcements and proposals in advance of the Budget on 30 October, the Adam Smith Institute reports that up to 20% of millionaires may leave the UK by 2028. And as noted above, it is not just the non-doms who we are seeing leave the UK. The Chancellor needs to tread a little carefully to ensure that any announcements do not end up costing the UK tax revenue, rather than increasing it.

It’s not just the UK that is looking at different methods of raising tax revenue in a globally mobile world, with a number of governments looking at a variety of different proposals to attract and retain individuals. Portugal has recently proposed a 10-year tax regime to attract and retain young people with up to 100% exemption from tax in the first year of employment in Portugal. This is likely to be a common theme in the coming years.

Likely to be less successful, a discussion around a global wealth tax is ongoing, however progress is difficult, and with the USA reportedly not onboard, it is hard to envisage a wealth tax being introduced on a global scale. Talk certainly seems to have cooled in the UK of a wealth tax, with implementation, reporting and collection likely to be difficult.

Whilst tax is certainly a consideration for some of those relocating, globally this is not always the case, with South Africa, India, Russia and Brazil also seeing a significant emigration, driven by a variety of political, security and quality of life factors. Lifestyle is increasingly becoming a key reason for relocating from the UK to the UAE, with relatively stable (warm!) weather in the UAE, in particular, a significant attraction.

When considering relocating, there are a number of factors that ought to be considered with your advisors, including:

• If required, how easy will it be to unwind any structures established, or investments made if the move needs to be reversed?
• Are your family members relocating with you, or will they be remaining behind?
• Are you willing to minimise time spent in your former homeland, at least in the first few years?
• Are you prepared to keep meticulous records of your activities to evidence your location (if required) for the tax authorities? 
• Is your place of planned relocation somewhere that you want to live? Whilst tax may be a significant factor, it is important that a match for your lifestyle is sought too. Would you prefer the lifestyle in, for example, Jersey or the UAE?

Whilst there are a host of non-tax factors that should be considered, from a UK tax perspective, considerations will include:

• CGT – The timing of the disposal of assets to crystallise gains, and whether they would be subject to tax in the UK or another jurisdiction
• IHT – Whether you are within the scope of UK IHT, and will remain within the scope before your arrival / after your departure, and whether there are any reliefs available;
• Double Taxation Treaties – Whether your destination country has a tax treaty with the UK, which would deal with any residual income or gains in the UK (or vice versa, if you are relocating to the UK).

As an advisory firm with a multi-national footprint ourselves, and clients based around the globe, Sanctoras is well positioned to support you and your family in considering a move. By helping you to understand the financial implications of your plans and supporting you to futureproof your affairs, we enable you to focus on living the life you want to lead – wherever that may be.

If you would like to speak to a specialist about your own move abroad, please contact me via hello@sanctoras.com

With the recent General Election bringing the Labour party to power, there’s a lot to unpack regarding their tax policies. 

Campaigns were filled with promises and speculations, making it challenging to keep track. We’ve summarised below the new Government’s key tax pledges and policies, so you can stay informed about what’s likely to be in store for personal tax and business taxes..

What did Labour say about tax before the election?

‍

‍Personal Tax Pledges

Labour promises no increases to income tax rates but plans to keep tax bands frozen until 2028, resulting in an increased ‘fiscal drag’ as rising wages push more people into higher tax brackets.

As noted above, there are no planned increases to NIC rates for individuals.

Capital Gains Tax

The taxation of carried interest is likely to be significantly changed, and in future may be taxable at income tax rates, rather than the current 28%.

Other potential CGT changes might be on the horizon, though it is expected that the disposals of an individual’s primary residence will remain exempt.

Taxation of non-UK domiciled individuals

Changes to the taxation of non-UK domiciled individuals were announced in the Budget in March 2024. These changes were widely supported by the new Chancellor, Rachel Reeves. 

However it is likely that there will be some tweaks to the proposals announced by Jeremy Hunt, mainly around the transitional provisions, and discounts to remittances in the first two years of the new rules.

The Labour manifesto simply stated that they would ‘abolish the ‘non-dom loophole’.

Inheritance Tax

There are likely to be significant changes to Inheritance Tax, as were trailed in the March 2024 Budget, although it is unclear as to whether the consultation announced by Jeremy Hunt in March 2024 will proceed. 

Reports suggest that legislation around Agricultural Relief and Business Relief (the two main IHT reliefs) will be changed, therefore reducing the availability of relief from IHT.

As noted above, it is also likely that there will be changes to the taxation of offshore trusts, with the excluded property regime removed.

Pensions

The lifetime allowance charge will likely not be re-introduced.

Reliefs on contributions to private pensions may be considered, with a flat rate of relief of 33% being suggested (which would benefit Basic Rate and Higher Rate Taxpayers, but Additional Rate Taxpayers would see a reduction in relief).

‍Stamp Duty Land Tax

The surcharge for non-UK residents purchasing residential property in England and Northern Ireland is likely to be increased from 2% to 3%.

Please note that Scotland and Wales have devolved tax powers, and have similar land transaction taxes, however set their own rates for these.

Business Taxes

Corporation tax and capital allowances

Prior to the election, the new Government repeatedly stated that they will not seek to increase the main rate of corporation tax, to provide stability for businesses in planning investments. Additionally, it is not expected for changes to be made to the full expensing for capital allowances, or the £1m Annual Investment Allowance.

A business tax “road map” is promised within six months to provide more investment decision certainty. 

Expect proposals on tax policies and business investment strategies to feature in this roadmap.

‍Business Investment

There are no planned changes to current R&D reliefs for corporate investment. 

Other pledges include creating a state-owned Energy company (GB Energy), a UK wealth fund with £1.5bn annual government funding, and strategies for industrial and infrastructure growth.

‍Indirect Tax

Pledges were made not to increase the main rate of VAT. 

However VAT will be imposed on private school fees and the business rate relief from which private schools currently benefit will be eliminated. 

It is likely that the legislation will also include certain anti-forestalling provisions, which will aim to counter proposals made by schools, which involve the pre-payment of fees. 

Enforcement

Labour has promised to bolster HMRC with 5,000 additional staff to reduce the UK’s “tax gap” (estimated at £39.8bn for 2022/23). 

This could result in increased compliance enforcement, particularly targeting small businesses, which account for a significant portion of the “tax gap”.

Stability

A key pledge from Chancellor Rachel Reeves is to hold only “one major fiscal event a year,” providing businesses with due warning of tax and spending policies, which is likely to be a popular move among businesses (and advisors!) seeking stability.

‍Employment Tax Pledges

It has been proposed that there will be no changes to employers’ or employees’ National Insurance Contributions (“NIC”) or pensions auto-enrolment obligations. 

Significant reforms are promised under the “New Deal for Working People,” including banning zero-hours contracts and enhancing employee rights from day one.

‍The next few months

• State Opening of Parliament on 17 July – which will reveal more about the Government’s legislative agenda. There is not likely to be significant tax content.
• A Budget / fiscal event – likely to be in Autumn 2024, once the Office of Budget Responsibility has completed their report and delivered this to the Chancellor.

On 4 March 2024, Companies House began implementing the first measures under the Economic Crime and Corporate Transparency Act (“the Act”). These enhanced powers are aimed at improving the integrity of the UK business environment by tackling economic crime and ensuring greater transparency. Our detailed blog post on the proposed provisions can be found here.

Stricter checks on company names

One of the key provisions of these new measures is the enhanced scrutiny of company names. Companies House will now run stronger checks on names that may give a false or misleading impression to the public. This initiative, together with the other measures now in effect, is designed to improve the accuracy and quality of the data held and combat the misuse of company names. All together, the measures now give Companies House the powers to take preventative measures to maintain the robustness of information on the register of companies.

The new measures build upon existing controls, which already prohibit names that are too similar to existing ones or that use restricted terms implying a connection to the UK government or other sensitive words.

Under the Act, Companies House can now also reject applications to register names if there is reason to believe the name:

• is intended to facilitate fraud;
• contains or comprises a computer code; or
• is likely to give the false impression of a connection to a foreign government or international organisation.

Moreover, Companies House has the authority to direct companies to change their names if they are found to be used, or intended to be used, for fraudulent activities. If a company fails to comply with this directive within 28 days, Companies House can assign a new name based on the company’s registered number and suppress the original name from the register.

Compliance and offences

Failure to comply with a directive to change a company name within 28 days constitutes an offence. Additionally, continuing to use a name that Companies House has directed to change is also an offence, underscoring the importance of adhering to these new regulations.

The role of the Company Names Tribunal

The Company Names Tribunal remains responsible for addressing objections to the use of names that are either identical to existing names with established goodwill or sufficiently similar to potentially mislead the public.

Future changes and implementation

The work to enhance the accuracy and integrity of the Companies House register will continue, with further changes planned for the coming years. These include mandatory identity verification for directors and other significant persons, streamlining account filing options for small and micro-entity companies, and transitioning towards mandatory software-based account filings, as mentioned in our previous blog post. Companies House will keep businesses updated on these changes as they come into effect.

Since Jeremy Hunt announced significant changes to the UK’s non-dom regime in the March Budget, Head of UK Private Client Services, Richard Thomson-Curtis has been digging into the details and impacts of these changes.

We thought it would be useful to share the answers to some of the most common questions we have encountered from clients and their advisors. Should you have a question relating to your own situation or future plans, please get in touch with rtc@sanctoras.com

Will these rules affect me if I am planning to move to the UK?

Yes. If you move to the UK for the first time on or after 6 April 2025, you would no longer be able to elect to be taxed on the remittance basis, but rather will be able to elect to be taxable on the Foreign Income and Gains (“FIG”) basis.

Any FIGs arising in the year an election is made will not be taxable in the UK, regardless of whether, or when they are brought to the UK. There will be no charge to access the FIG basis of taxation.

Taxpayers will be able to elect for the FIG basis of taxation for the first four tax years after their arrival to the UK. From the fifth year onwards, taxpayers will be taxable on their worldwide income and gains.

I have been a UK resident before, does that affect my ability to claim the FIG basis?

To be considered to be coming to the UK for the first time, an individual must not have been resident in the UK for at least 10 years.

As draft legislation has not yet been released, we do not know if this 10 year period must be consecutive, or whether those who have only been in the UK for short periods will have some relief (e.g., 10 of the last 12 years must not have been a year of UK residence) 

I’m in the UK already, and file on the remittance basis. What should I do?

If you have been in the UK for fewer than 4 years, you will be able to benefit from the FIG regime until your 4th year of residence.

If you have been in the UK for more than 4 years, you will not be able to benefit from the FIG regime, and will be taxable on your worldwide income and gains.

Based on current announcements made by Jeremy Hunt, there will be some transitional measures put in place to enable individuals who were previously taxable on the remittance basis to remit previously protected income and gains to the UK at a lower tax rate of 12% in 2025/26 and 2026/27. 

Additionally, foreign income arising and brought to the UK in 2025/26 will be subject to a 50% discount on the amount subject to tax, thereby lessening the immediate impact.

I’m in the UK already, and am deemed domiciled in the UK. What do I do?

You should be able to benefit from the transitional rules, and therefore bring previously shielded income and gains to the UK at a lower tax rate of 12% for two years.

Depending on how long you have been resident in the UK for, you may be domiciled in the UK for the purposes of the new proposed IHT legislation, and therefore subject to UK IHT on your worldwide assets.

I will leave the UK prior to 6 April 2025. Will these rules still affect me?

The UK only charges UK income tax and capital gains tax on certain income and gains. Usually this is limited to UK rental income, some UK employment income, and gains realised on UK property (both residential and commercial).

Depending on how long you have been resident in the UK for, you may remain domiciled in the UK for the purposes of the new proposed IHT legislation, and therefore subject to UK IHT on your worldwide assets for a period.

What will the changes mean for the trusts of which I am a settlor or beneficiary?

Settlors of settlor-interested trust who have been resident in the UK for under 4 years (and claim the FIG basis of taxation), will not be subject to tax on the income and gains of a settlor-interested trust. It is not yet clear whether income and gains would be added to the stockpiled income and gains pools.

Settlors of settlor-interested trusts who have been resident in the UK for over 4 years will be taxed in full on the income and gains of the settlement. Income and gains would not be added to the stockpiled income and gains pools.

Beneficiaries of trusts will continue to be taxable on the benefits they receive from the trusts to the extent that they are matched to the stockpiled income and gains of the trust.

Considerations should be made as to whether the settlor of the trust may be excluded from benefiting from the trust (including their spouse and any minor children). This can switch off the income tax anti-avoidance rules, however further exclusions would need to be made to switch off capital gains tax anti-avoidance rules.

Will Labour keep these rules?

As we have discussed in one of our most recent articles, the Labour Party were likely to enact significant changes to the remittance basis if elected.

Rachel Reeves has suggested that the party agrees with “most” of the changes introduced, however would seek to amend some of the transitional rules introduced by Jeremy Hunt (namely the 50% discount on 2025/26 foreign income would be removed), and remove the UK IHT exemptions granted to excluded property trusts (broadly non-UK trusts settled by non-UK domiciled individuals with non-UK situs assets).

What about Inheritance Tax?

Given the inexorable link between domicile and IHT (i.e., that UK domiciled individuals are subject to IHT on their worldwide assets), changing legislation around domicile was going to have a significant impact on IHT.

In his Budget in March, Jeremy Hunt announced a consultation on proposed changes to IHT. The Budget documents suggested that a person would be subject to UK IHT on their worldwide assets after being resident in the UK for 10 years.

Any changes to IHT are not expected to be introduced before 6 April 2026.

It is not expected that there will be any changes introduced regarding IHT on UK situs assets, and that any UK situs assets will continue to be subject to UK IHT, regardless of the domicile of the owner.

What should I do?

To the extent that they haven’t already, non-doms must start considering their options as a priority. Get in touch with your usual Sanctoras contact, or any of the team, for an initial confidential discussion.

30 April is the deadline for Annual Tax on Enveloped Dwellings

Companies, and some partnerships with at least one corporate partner, may need to file an Annual Tax on Enveloped Dwellings (ATED) return by 30 April 2024 if they hold an interest in UK residential property. This advance filing is for the period 1April 2024 to 31 March 2025 and applies if the property was valued (or revalued) at £500,000 or more on 1 April 2022, or if the purchase price (if acquired after 1 April 2022) exceeded £500,000.

Many companies will not have to pay the ATED charge, which is a flat annual fee based on the value of the property – for example, properties let wholly to third parties or under construction may be exempt from the charge. However, they are still required to file an ATED return and may incur penalties for late submission.

If you need assistance with your ATED compliance, or would like to discuss whether ATED applies to you, please don’t hesitate to get in touch with Aimée Dolbear ad@sanctoras.com or your usual Sanctoras contact.

Given the inexorable link between one’s domicile status under English law and exposure to UK Inheritance Tax (“IHT“), any changes to the interaction between common law domicile and the associated taxing provisions were always going to have a knock-on effect on IHT.

Currently (and very broadly speaking), an individual who is domiciled in the UK is subject to IHT on their worldwide assets when they pass away. This is largely irrespective of whether that person is tax resident in the UK or not. In yesterday’s budget, however, it was announced that it was the intention for the scope of IHT to move to a residence-based regime, rather than being linked to a person’s domicile status – albeit with no changes to be effective before 6 April 2025.

There is very often very substantial nuance (and practicality) between headline announcements and the eventual legislation. The fairly modest pieces of information we do know are limited to those released in the Red Book (the deep technical analysis behind the executive summary), which includes the promise of a consultation from HMRC, including on elements such as a 10-year exemption from IHT for new arrivals to the UK, and a 10-year ‘tail’ for those leaving the UK.  Whether a tail – the period of time before which someone may fall outside the UK IHT net – would, itself, have a taper to reduce the applicable rate of IHT over that period (similar to how we see with Potentially Exempt Transfers – “PETs”) will depend on the outcome of the consultation.

What about non-UK trusts?

Of course a further effect of the changes announced yesterday are concerning non-UK trusts established by non-UK domiciled settlors. Although such trusts will appear to lose many or most tax ‘protections’ as a result of the proposed new rules, the preliminary announcements do suggest that the IHT protections afforded to excluded property trusts that have already been established will remain in place. These trusts already experienced sweeping changes in 2017, so will there really be a desire to further amend rules around existing trusts that, in reality, affect only a very small part of the population?

A question of when

The next question is when any such changes may be expected to take effect. Given that there will be an General Election in the UK by the end of January 2025 (and it is generally assumed much sooner) at which the incumbent Conservative Party currently seems on course to lose, it is highly unlikely that the consultation period, and the drafting and enacting of legislation would happen by April 2025. The raft of trust changes in 2017 and 2018 were fraught with uncertainty, apparent gaps and mass confusion amongst the public and advisors alike, so it may well be that the Treasury would prefer to have more time to deal with the scrapping of a tax regime that has existed in the UK since at least 1799.

At this stage, assuming the political appetite remains to make these changes, April 2026 is looking like a far more realistic timeframe.

Watch this space

As and when we receive more information on the consultation and eventually the legislation, we will release further updates. If you would like to discuss your options and what the changes may mean for you in practice, please don’t hesitate to get in touch with your usual contact, or via hello@sanctoras.com

We are now around 11 months into the 2023/24 tax year, which means it is time for individuals to think about how their assets and income are structured, thus ensuring that they are taking advantage of any allowances and exemptions available to them.

The elements covered in this article may not apply to everyone, but give some idea of the areas to consider. Of course, it is not necessary to wait until the end of the tax year to take advantage of some of these opportunities, however often the full picture of an individual’s tax affairs may not be known until towards the end of the year.

‍Key areas to consider

‍Income Tax

There are currently no proposed changes to the income tax personal allowance, which will remain at £12,570 for the 2024/25 tax year.

‍Structuring of income-producing assets

For individuals taxable at the higher or additional rate (40/45%), and whose spouse has remaining personal allowance or basic rate band, it may be efficient to transfer some or all of the assets producing the income to their spouse.

Pensions

Making contributions to a registered pension scheme has the effect of increasing an individual’s basic rate band, and therefore tax relief is given by way of increasing the individual’s income taxable at 20%, rather than at 40/45%.

It is possible to carry forward up to 3 years of unused pension annual allowance (up to £60,000 per year), allowing for a single larger contribution to be made in a year. Therefore for the current year, it is possible to carry forward unused contributions from the 2020/21 tax year onwards.

However, for example, if contributing £100,000 to their pension scheme, an individual must also have “pensionable income” (broadly earnings) of at least £100,000 in the year of the contribution.

Additionally, for those with higher income, their annual allowance may have been reduced (to a minimum of £10,000), and the calculation of any unused allowance is based on their income for the year in question.

Finally, to add some more complexity into pension savings, it is expected that the pension Lifetime Allowance (currently c£1.07m) is expected to be abolished from 6 April 2024. This is expected to be replaced by new allowances. We have not seen legislation yet for exactly what these allowances will look like, but it is expected to be included in the Finance Bill 2024.

‍Gift Aid

Making charitable donations and claiming Gift Aid has a similar effect to pension contributions, by way of increasing income taxable at the basic rate.

To qualify donations must be made to UK registered charities (or Community Amateur Sport Clubs), or to some EEA registered charities. Donations to US charities do not qualify for Gift Aid (however many US charities do have UK registered equivalents).

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Capital Gains Tax (CGT)

Most UK residents have an annual exemption of £6,000 in 2023/24. If unused, this cannot be carried forward.

If, at this point of the year, any annual exemption remains unused, individuals may consider selling some assets/investments to crystallise gains and use their annual exemption. Additionally, where investments are currently standing at a loss, crystallising losses to offset any significant gains can also mitigate any CGT liability. Unlike the annual exemption, any unused capital losses can be carried forward to offset against any future capital gains.

The annual exemption is due to be halved to £3,000 from 6 April 2024, therefore taking advantage of the higher exemption this year (rather than after 6 April) can save up to an additional £840 of CGT.

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Other considerations

Inheritance Tax (IHT)

Generally, we would recommend that an individual reviews their lifetime planning regularly to ensure that their objectives are being met. A regular review of wills (especially where personal or work circumstances change) is also likely to be beneficial, especially where legislation may have recently changed. An individual currently has a nil-rate band of £325,000. Assets in an individual’s estate in excess of this may be chargeable to IHT at up to 40%.

Individuals have an IHT annual allowances of £3,000 per year, allowing for gifts to be immediately out of the scope of IHT. The annual allowance may be carried forward for one year, allowing for a gift of £6,000 to be made in a single year free of IHT.

Other allowances, such as the making of regular gifts out of income, and wedding gifts to certain people can also be made free of IHT. Advice should be sought, especially in respect of gifts out of income, as record keeping is key.

Individual Savings Accounts (ISAs)

UK resident individuals have an overall ISA allowance of £20,000 per year. Income and gains arising in an ISA are paid free of tax. Therefore, when combined with the transfer of income-producing assets between spouses, ISAs are an effective shelter from UK tax.

Note that many other jurisdictions do not recognise the tax-free nature of ISAs (e.g., the USA), so further advice should be sought if an individual holds an ISA when also a taxpayer in another jurisdiction.

‍Tax Efficient Investments

Investments such as the Enterprise Investment Scheme (EIS), Seed Enterprise investment Scheme (SEIS), and Venture Capital Trusts (VCTs) are common tax efficient investments which provide immediate income tax relief (at up to 50% of the investment), and which also may be exempt from CGT on disposal.

Relief can be claimed in the year of investment or, subject to the relevant provisions being met, be deemed to have been made in the previous year.

This post reflects the laws in force as of 22 February 2024. As ever, to discuss any of the above further, please get in touch with your usual Sanctoras contact.

Companies House handed world-leading new powers to clamp down on economic crime

After receiving Royal Assent on 26 October 2023, the Economic Crime and Corporate Transparency Act 2023 (“the Act” or “the 2023 Act”) is set to complement the Economic Crime (Transparency and Enforcement) Act 2022 (“the 2022 Act”) with the introduction of several new measures. Amongst other things, most notably, the 2022 Act established the Register of Overseas Entities, giving wide powers to Companies House to obtain information on overseas entities that own UK property and their beneficial owners.

The 2023 Act, which provides further powers to Companies House forms ‘the biggest shakeup to the service in its 180-year history’, introducing ‘world-leading’ powers which will allow UK authorities to clamp down further on economic crime.

As we stand today, preparations are underway to implement these changes on or after 4 March 2024, although this is subject to finalisation and confirmation of transition periods. These will be announced to ensure a smooth and manageable process of adaptation for companies.

Part 1 of the Act: Companies House Reforms – An historic upgrade

The first part of the Act outlines how Companies House will transform into an ‘active gatekeeper’ of corporate information, aligning with its new statutory objective to ensure the integrity of its register. This involves the following key developments:  

• Enhanced scrutiny over submitted information, including the power to reject documents with inconsistencies;
• New investigative powers, which can be found in a GOV factsheet; and
• A new role of analysis of information held by Companies House for the purposes of preventing or detecting crime.

The Act also introduces mandatory identification requirements for all directors, persons with significant control (“PSC”), and document filers. The verification will be able to be done directly through Companies House or indirectly via an authorised corporate service provider. In introducing this measure, efforts will be made to prevent the appointment of fictitious (‘front’ or ‘straw men’) directors. A 2022 impact statement estimated that between 5.7 million and 8.8 million individuals would need to verify their identity under this measure.

Further measures to be introduced to aid Companies House as part of Part 1 of the Act are briefly summarised below:

• Registered office address: Companies must have a registered office address where physical documents can be reliably delivered and received by someone acting on behalf of the company. PO box addresses will not be acceptable.
• Registered email address: Companies are required to provide a valid email address at the time of incorporation or at their first confirmation statement after the new rules apply. This email should be one where communications from Companies House are likely to be noticed and addressed by someone from the company.
• Director disqualification: Individuals who are disqualified under the directors disqualification legislation, such as those subject to bankruptcy restriction orders, are prohibited from acting as directors in any company.
• Abolition of certain registers: Companies no longer need to maintain their own registers of directors, directors’ residential addresses, secretaries, or PSC. The only register companies need to maintain is the register of members.
• One-off membership information: Companies are required to submit detailed information about their members, including full names, in a one-off membership statement along with their confirmation statement. This applies to all existing companies, with an additional requirement for traded companies to include details of members holding at least 5% of any class of shares.
• Micro-entities filing accounts: Micro-entities, which were previously exempt, will be required to file annual accounts.
• False statement offences: New offences include delivering a document or making a statement to Companies House that is materially misleading, false, or deceptive without a reasonable excuse. 

Part 2: Limited Partnerships (“LPs”) Reforms

The Act revises the framework for LPs, focusing on:

• Enhanced registration and transparency requirements.
• A streamlined process for the dissolution of LPs and removal from the register.

Part 3: New Measures for Organisational Accountability in Economic Crimes

The Act introduces two significant measures to strengthen accountability for economic crimes:

1. A new ‘failure to prevent fraud’ offence, imposing strict liability on organisations if an associated person commits fraud to benefit the organisation or its clients.
2. A reform in the identification doctrine for economic crimes, expanding the scope to cover senior managers and aligning with modern corporate structures.

These changes, which have been anticipated for some time, promise to bring enhanced clarity and robustness to our operations and compliance frameworks.

It’s important to note that, in this briefing, Part 1 of the Act is explained in greater detail due to the nature of our client base. If you feel that you would be more affected by the other parts of the Act, please get in touch with one of the team at Sanctoras, and we can provide some further guidance on these areas.

Next steps

We recognise the need for the following actions to take in light of the new legislation:

• Understanding the new Role of Companies House: Grasping the implications of Companies House becoming an ‘active gatekeeper’. Preparing for enhanced scrutiny and the power of Companies House to reject documents with inconsistencies.
• Mandatory Identification Requirements: Compliance with new identity verification processes for directors, PSC, and document filers. Prevention of the appointment of fictitious directors.
• Registered Office and Email Address Requirements: Ensuring a valid physical office address and email address are provided, and understanding the implications of these requirements.
• Director Disqualification Compliance: Ensuring awareness of the implications of director disqualification, and bankruptcy restriction orders.
• Abolition of Certain Registers and One-Off Membership Information: Adapting to the register of members maintenance requirements, including submission of one-off membership statements.
• Filing Requirements for Micro-Entities: Navigating the new filing obligations for micro-entities.
• Prevention of False Statement Offences: Understanding the new offences related to misleading, false, or deceptive documents or statements.
• Reforms to LPs: Adapting to enhanced registration and transparency requirements for LPs. 
• Organisational Accountability in Economic Crimes: Preparing for the ‘failure to prevent fraud’ offence, and adapting to the expanded scope of identification doctrine for economic crimes.
• Staggered Implementation of the Act: Close monitoring of the phased implementation of the Act’s provisions. Ensuring ongoing compliance with evolving legislative changes.

Be aware that strategies for the implementation of the Act are not static; they will incrementally adapt to ongoing legislative changes. Our commitment to continuous monitoring and adaptation is fundamental to helping our clients navigate the complexities of this regulatory landscape with confidence and clarity.

At Sanctoras, our primary role is to provide guidance tailored to the individual needs of our clients. We recognise that all companies will need to pay attention to the new changes, but that each client’s situation is distinct.

Should you wish to engage us to provide personalised advice to address the specific challenges and opportunities presented to your business by the Act, please contact Ed Maycock via hello@sanctoras.com