MOVING FORWARD FROM THE OCTOBER BUDGET

As the aftermath of October’s budget announcement settles down, businesses, high-net-worth-individuals and non-domicile residents are looking to review their current strategies and make changes where necessary. This is especially important as we move towards the end of 2024, and many begin planning for the end of the financial year in March. To make the most of this time, we wanted to share some advice on streamlining tax requirements, reviewing accounts and making the most of the money you have. 

 

Non-domicile residents 

For many non-domicile residents, any appeal the UK held has likely gone, however for those that choose to stay it is absolutely vital to optimise your tax situation sooner rather than later. The changes coming in April 2025 aim to replace the current remittance basis system with a residence-based taxation regime.  

As we have previously mentioned, under the new regime, there will be ‘100% relief on foreign income and gains for new arrivals to the UK in their first 4 years of tax residence, provided they have not been a UK tax resident in any of the 10 consecutive years prior to their arrival (4-years foreign income and gains regime)’(1). For current residents, the change in legislation means non-UK assets will be included in inheritance tax and capital gains tax, as well as foreign income being taxed from the 4th year onwards. 

So, what can you do to streamline your tax obligations should you remain in the UK? First, utilise the temporary repatriation facility (TRF), where you could remit foreign income and gains under the TRF to benefit from reduced tax rates (12-15% during the transitional years). Second, if you are eligible, make the most of the four-year foreign income and gains exemption period by focusing foreign investment activities within this timeframe. Third, review any offshore trust arrangements that are in place, to ensure they are compliant with legislation and minimise any exposure to the new tax rules that are coming in place. Finally, review your inheritance tax strategies. Consider restructuring global asset holdings or reducing UK ties to mitigate worldwide inheritance tax liability. 

 

Business owners 

Business owners were also hit hard with the budget and most now face several new challenges in the current landscape. However, alongside this are a lot of opportunities to manage tax obligations effectively. 

A key opportunity is to utilise the increased employment allowance (EA). From April 2025, the EA is rising from £5,000 to £10,500, which will somewhat combat the rise in employer contributions (NIC). Employers can now employ up to four workers on the National Living Wage without incurring NIC costs. On the opposite side of this is the increase of NIC, which will go up to 15%, and the threshold for contributions is dropping to £5,000. It will be a balancing act to adjust hiring strategies and budgets to manage these changes effectively, but one that will certainly pay off in the long run. It is also important to prepare for the national living wage increase, which is rising by 7.6% in April 2025. 

If you are looking to grow your business, it is worth making the most of the annual investment allowance – which remains at £1 million. This means businesses can deduct significant amounts of qualifying investments from taxable profits. Alongside this, business owners in hospitality, retail and leisure should leverage business rate reliefs, as they can benefit from a 40% reduction in business rates until 2026. 

Whether you are planning to pass the business down or sell it, reviewing your strategies should be at the top of your list of priorities. It is important to note that the changes to Business Property Relief (BPR) mean that only the first £1 million of qualifying business assets will receive 100% relief, with any excess assets being taxed at 50%. This adjustment starts in 2026, so plan carefully. If you are looking to sell off elements of the business, also consider that Capital Gains Tax on business asset disposals will gradually increase, rising to 14% in 2025 and 18% in 2026. 

 

High-net-worth-individuals 

For wealthy individuals, the increases to inheritance tax (IHT) will have been an expected disappointment. From April 2027 pensions will also be included in taxable estates for IHT, so it may be necessary to consider alternative savings strategies such as ISAs, which remain IHT-free. 

Lifetime gifting and trust arrangements can help to transfer wealth efficiently, especially ahead of the IHT reforms that will impact agriculture and business property reliefs from April 2026.  

Time the sales of your assets carefully, as capital gains rates are going to be increasing to 18% (the basic rate) and 24% (the higher rate). In line with this, look to time any sales of assets strategically and use reliefs to mitigate liabilities. For those with assets internationally, look to explore residence-based schemes or potentially consider relocating to a more tax-efficient location. 

Taking advantage of the UK’s gift exemption, with particular focus on the seven-year-rule, can significantly reduce inheritance tax exposure if you plan ahead carefully. As long as the donor lives for at least seven years after making the gift, the beneficiaries will not be hit with inheritance tax. 

A final, and key, element of tax efficiency is to consider offshore investment and wealth diversification. Many high-net-worth-individuals use offshore investments to defer UK tax liabilities on non-Uk assets, as if structured correctly it can keep profits offshore without immediate UK taxation. 

As always, before making any changes to business, funds or otherwise, please seek professional advice from an independent expert to review the specific circumstances and provide insight where needed. 

 

Here at Turner Little, we have decades of experience in developing bespoke strategies for businesses, entrepreneurs and high net worth individuals. Understanding the most appropriate business structure in the best location is essential to minimising tax liabilities and creating growth opportunities. Please get in touch to learn more about our Discovery service, to review your current situation and create a bespoke wealth and asset protection strategy.