Autumn Budget 2024

Our tax experts Pat Nown and Norman Allison discuss some of the main announcements from the Autumn Budget on 30 October 2024 and provide their thoughts on the key issues for taxpayers. Topics include the critical capital tax changes, the impact on employers and the double cab pick up double-U turn.

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Transcript

[00:00:00] Pat Nown: Computer. Okay. 

[00:00:02] That's recording, Pat. You okay to start, Pat? Yeah, and I'm loud and clear, am I? Perfect. Absolutely perfect. Yeah. Okay. Hello and welcome to this Mercia podcast. My name's Norman Allison and I'm joined with my colleague Pat Noun today. Fortunate to have Pat actually on this podcast. 

[00:00:21] He's had some major electricity problems last night. But welcome to this session. What we're going to be doing is diving into some of the topical aspects that have appeared in Autumn Budget 2024. And we thought we'd start off. With these very topical, a couple of very topical areas where we've had feedback already from clients, and I'm sure you're aware it's been on the news. 

[00:00:45] We're going to look at some of the changes in relation to IHT and pension funds and changes to BPR and APR. So, Pat, can we start off with you? Is that going to be, can you explain some of these significant changes that have come through on those areas?  

[00:00:59] Norman Allison: Yes, I certainly can. So obviously we're looking at this podcast the morning after I've delivered my rapid reaction webinar and there's certainly a few questions on the change to include pension funds in inheritance tax estates. 

[00:01:17] But first of all just I think it's worthwhile to the listeners to just put it into the context of all of the speculation prior to the budget in respect to pensions generally. And in the documentation on the day government even acknowledged the staggering cost of private pensions tax relief has now reached over 70 billion. 

[00:01:44] That is in terms of gross pension income tax and NIC reliefs. So, yeah, it is. It's just an amazing figure, isn't it? And it's just been growing and growing. And I know you and I, Norm, and some of our other tax colleagues, were astounded in 23 24 when they, in fact, increased the annual allowance and also other further flexibilities in pension savings. 

[00:02:13] Speaker 4: Yes.  
 

[00:02:15] Norman Allison: It's just so expensive. But they have decided in spite of the fact that everybody was really worried that they might have their income tax relief withdrawn, for example there were rumors going around about maybe there was going to be a taxation of the tax free lump sum et cetera, maybe a reduction in the annual allowance. 

[00:02:39] But at the end of the day, government have decided that It is of course really important to encourage saving for retirement and later life. And what they want to ensure is that those tax reliefs are being used for their intended purpose. And that is not to build up a substantial pension fund that you can then pass on to beneficiaries. 

[00:03:05] They want people to use their pension funds during lifetime, which is why they have decided not to mess around with any of the what we would call more traditional taxes aspects of pensions. So the tax free lump sum stays tax free. We can still get higher rate relief on pension contributions. 

[00:03:29] They have not even though Labour government said, sorry, the Labour in opposition said that they would reverse certain changes such as the the excess charges if your fund was above what was then known as the lifetime allowance. And by the way, actually somebody said to me, oh, they've abolished the lifetime allowance. 

[00:03:48] I said, yes, but it's now replaced with something called the lump sum death and benefit allowance. There is still a cap, you know, of 1, 073, 100, which is used for certain purposes. And one of those is of course, that figure 25 percent of that figure fixes the tax free lump sum. It's just that if your fund is over. 

[00:04:11] that limit. There's no longer these excess charges, 25%, 55%. You just end up with a marginal rate of income tax when you withdraw it.  

[00:04:22] Speaker 4: Yes.  
 

[00:04:23] Norman Allison: But they decided not to make any changes there. Yeah. And I think, were you surprised about that? Yes, very much  

[00:04:30] Pat Nown: so.  
 

[00:04:30] Norman Allison: Yeah, I think many people were and it is a huge sigh of relief. 

[00:04:34] But of course, we didn't get away scot free. So, taxing pension funds at death for IHD purposes is a massive change for some. And there are various statistics that were put out there on the deck. Well, let's try and explain some of what we know because we don't have draft legislation for this. We don't even have a detailed technical note. 

[00:05:00] But what has been happening in recent times is that those that have got a certain amount of wealth, maybe that wealth includes things like buy to let properties investments, including ices. The recommendation has been, well, spend your ISA accounts, sell off your buy to let properties and use that to live on in your retirement because those are subject to 40 percent IHT and instead retain your pension fund because quite simply, let's assume that a pension fund for these purposes doesn't exceed a million pounds for convenience. 

[00:05:39] If you died before you were age 75 that pension fund passed on to your fisheries. income tax free under the pensions death benefits rules and IHT free. Now that doesn't actually apply to all pension funds. It's just that the majority of people have a defined contribution fund and defined contribution funds are held in a discretionary trust environment and discretionary trusts do not get included in the IHT estate. 

[00:06:14] Now there are some non discretionary pension funds and I always caveat stuff when I'm talking about pensions. Some pension funds are and have always been IHT taxable, but for the majority of people, that is not the case. And so it was good planning, certainly up until the age of 75 to say, yes, spend your other assets. 

[00:06:37] Don't touch your pension fund because this can be passed over to your beneficiaries, this wealth, this capital inheritance tax free, as well as income tax free. Once you get to age 75 the income tax position is different. And so, once you age over 75 then effectively it doesn't pass over as a lump sum benefit tax free. 

[00:07:02] But of course beneficiaries then when they access the fund would pay Marginal rates of income tax,  

[00:07:10] Speaker 4: right?  

[00:07:10] Norman Allison: So there's no changes to income tax But what they've decided to do is that unused pension funds And death benefits because this does apply. So that's one of the first questions I got yesterday Was does this apply to defined benefit schemes? 

[00:07:26] And the answer is yes in a situation where a defined benefits scheme was not already caught for IHT purposes because it was of a discretionary nature. And of course, we also have to remember that each defined benefits scheme has different rules. And sometimes when a member dies, there isn't any fund left at death for a defined benefits scheme. 

[00:07:52] But where there is, yes, the rules do apply there as well. I think the word unused is not very technical with pension funds. You know, I think what they're referring to is uncrystallized pension funds. Yeah.  

[00:08:06] Somebody hasn't used their pension funds to turn it into, for example, a right to a lifetime annuity. 

[00:08:14] Because if they had, if they crystallized their pension fund and turned it into a lifetime annuity, in some cases that would end at death. So there isn't any unused pension fund at death.  

[00:08:27] Speaker 4: Yeah.  

[00:08:27] Norman Allison: And what there might be, and I do think it's worth mentioning this, but it might be that that on the death of the person who has the annual pension, it may then be an Part of the deal that there is a dependent pension that continues and that isn't caught by these rules So I think unused pension funds, which is the language they're using is a little bit simplistic In the pension fund world, we think it means un crystallized funds. 

[00:08:58] You've got a pot of money that you can control, you can draw down on, you can take lump sums from. And it's those unused pension funds or with defined benefit schemes, any separate death benefits, which will become part of the IHT estate. So there is a technical consult, consultation, but, so a lot of the detail is simply not available yet here. 

[00:09:22] Speaker 4: But  
 

[00:09:25] Norman Allison: of course, it's going to be part of your estate. So the first you know, this was a question that came up yesterday. Somebody said to me, therefore, will it affect the two million pound limit for the purposes of the residence nil rate band? And the answer has to be yes. Of course it's going to.  

[00:09:42] Speaker 4: If  
 

[00:09:42] Norman Allison: your inheritance tax estate increases, then, and that therefore pushes you over the two million pound limit, then you are going to have a tapering of residence nil rate bands. 

[00:09:54] So there's almost a double whammy there, isn't there? Yeah, these knock on effects. And another interesting question was will it be treated as settled property in the estate, which of course is relevant when you're trying to work out whether the 10 percent charity exemption applies because of the way that, that particular relief works. 

[00:10:15] Not a clue on that one because we have no we don't have enough detail, but I was thinking about it last night and I was thinking, well, technically. It's a bit, it's a bit of a contradiction anyway. It's many of these pension funds are discretionary funds, so they shouldn't even be in the estate anyway. 

[00:10:33] But if we're going to attach them to the estate, then I think that must be free estate because up until the point of death, you do have control over these assets because you can say to the pensions administrator, I want to take all my money out. And that's not something you could do with a normal trust. 

[00:10:50] So I suspect it might be part of free estate, but I'm really just talking off the top of my head then because that's the sort of detail question that we're going to have to wait for detailed technical notes or draft legislation to answer. But it's also going to be a bit of an administration nightmare as well. 

[00:11:09] It's not just about the IHT costs because it's the pension scheme administrators that will be liable for the reporting and paying of the IHT on the pension fund element. But of course, the personal representatives of the estate will be the ones that will have to liaise with them and who will be responsible, as usual, the IHT on the rest of the estate. 

[00:11:35] So this is certainly going to add a complication into dealing with the inheritance tax estates of individuals at debt. So all interesting stuff not a welcome one. I know guys. Let's just go out spend it all  

[00:11:53] Speaker 4: I'm  
 

[00:11:56] Norman Allison: sure it's not just the people with the pension funds that are upset probably their offspring who are thinking Oh, I'm gonna get this nice pot of money Well, my mom and dad might be about to go out and spend all that money now given these changes rather than pay 40 percent IHT to the taxman. 

[00:12:18] But of course, the other one, and of course, I think there's probably, you know, did you say something about Jeremy, what's his name, Cox? And I'm complaining about it.  

[00:12:29] Pat Nown: Jeremy Clark's farm diddly squat just out somewhere near Oxford, I believe. He's not happy with these changes at all. Well, he wouldn't be. So,  

[00:12:38] Norman Allison: but it's been on the cards for many years. 

[00:12:40] And as I often explain to people about agricultural property relief and business property relief, historically, we've never had it so good. Yeah. Back when I first started doing baby tacks many years ago, but a long time ago now. in the early 1980s. I went and you're not that far off my age. You were probably remembering your first studies as well, but in fact the rate of business property relief was 50 percent and APR in many instances Was 30%. 

[00:13:17] Pat Nown: It does ring a bell. Yep.  

[00:13:19] Norman Allison: It does ring a bell. . So we've been really fortunate in that an awful lot of transactions that are in connection with these two reliefs do actually have a hundred percent currently not all a PR and not all BPR transactions or a hundred percent, but certainly the significant ones like the ownership of Qud company shares. 

[00:13:41] the ownership of a farm, which would get a combination of APR and BPR. So it's not surprising. I mean, there's been rumors for years about people being concerned about these two major reliefs being. Challenge and understandably. So, the amounts the most recent statistics show that in a given tax year, so 21, 22 is the year I'm using 4. 

[00:14:08] 42 billion was claimed in respect of APR and BPR. So that's a significant relief, isn't it? It is absolutely. It's very much so. So, there's been a lot of talk about them tightening up the definition of APR and BPR, and I wouldn't rule out the possibility of that in a future government because as I did remind people yesterday when I did the budget webinar, but the the budget report actually starts off by saying something along the lines of setting the foundations  

[00:14:44] It's actually says, yes, I think it's fixing the foundations to deliver change  

[00:14:49] Speaker 4: was  
 

[00:14:49] Norman Allison: actually the heading on the autumn budget report yesterday. 

[00:14:54] So I don't think we're through potentially a raft of changes, particularly on capital taxes over the course of this parliament. But for now, I think that they have taken a sort of it is. Well, potentially on paper a simple solution that is let's just give people a million pound allowance a bit like we have the million pound allowance for business asset disposal relief On the cgt side of things. 

[00:15:22] Let's just give a million pound allowance You can either use it on bpr or apr where you have ownership of assets that would give rise to a hundred percent relief and then the rest will be at 50%. So this applies where we qualify for a hundred percent relief. You'll use the 1 million pound allowance on value that qualifies for the a hundred percent. 

[00:15:45] There's no change to the the 50% rate. So that still remains unlimited,  

[00:15:52] Speaker 4: right?  

[00:15:53] Norman Allison: I think actually it's also worth pointing out, but please everybody remember that APR now is only restricted to the UK. We can no longer extend it to the European Economic Area. So does this just affect death estates? 

[00:16:07] No. Technically, if you were to make a gift, a lifetime gift to an individual today, which obviously starts the seven year clock running for a potentially exempt transfer And then die post 6th of April, 26. Yeah. Yeah. Then obviously that would become a failed pet. It would become chargeable and therefore the rules would apply. 

[00:16:32] Speaker 4: Yeah. Okay.  

[00:16:33] Norman Allison: So what that there for things is this rules don't come in until 6th of April, 26th. So. I can only conclude from that if you made a potentially exempt transfer today of something that was eligible for 100 percent BPR, say 2 million worth, but you died next year, i. e. before the 5th of April, 26, then does that mean you still get your unlimited 100 percent BPR? 

[00:17:00] Well, as it stands, given that we don't have any draft legislation or anti avoidance, we that would seem to come to the conclusion. So, but of course, we can't go around saying to clients, yeah, give now and die within the next 12 months. Can we not really the sort of plan that we would recommend? But and it would be interesting to see if there is Any anti avoidance that does come out in respect of that once we get obviously more information. 

[00:17:28] So yeah, it's it will be interesting to see. And the idea is if you've got more than a million pounds worth and APR and BPR, that they will divvy up, you know, a portion it proportionately between the two.  

[00:17:44] Pat Nown: Yes,  
 

[00:17:45] Norman Allison: Trusts Yeah, because Trusts is a good point isn't it? There is a separate 1 million allowance for a Trust although there is going to be, there is already now some anti avoidance there So if you Net today went and set up a load of trusts. 

[00:18:02] Those trusts would have to share a 1 million pound allowance. Yeah.  

[00:18:07] Speaker 4: Yeah.  

[00:18:07] Norman Allison: But if the trust is already set up, each trust that's already been set up which has agricultural or relevant business property will get a million pound allowance. So some of the high net worth individuals at least will be able to benefit from that because they already have trusts established. 

[00:18:29] Speaker 4: Okay.  

[00:18:30] Norman Allison: There were a couple of other little bits though not they are important. So I'm going to just briefly mention those as well. We're not going to be mentioning everything from the budget, but as we're on the subject of BPR and APR, they have this has been a long time coming AIM shares will no longer get 100 percent relief for BPR, it will be 50%, but that came in from yes, transactions from the announcement yesterday. 

[00:18:58] So if you've already given the shares away, then in theory, and then you die, you should qualify for the a hundred percent BPR relief. And they're going to extend the definition of APR. This has been something previously announced, but they've confirmed it. That it will apply from next April to cover land managed under environmental agreement, agreements. 

[00:19:22] Pat Nown: Okay.  

[00:19:23] Norman Allison: So that's pretty much a roundup on IHT, but of course, there were some changes where they're not under the other capital taxes as well. And I suppose CGT is of particular interest to business owners, etc. So, maybe over to you, Norman, on this one.  

[00:19:44] Pat Nown: Okay, thanks for that, Pat. Yes, lots of rumours leading up to the budget, of course, that we were going to have some changes, perhaps, to the rates of CGT, and that was confirmed on the budget day. 

[00:19:56] In effect, what they've basically said is that for disposals Other than residential properties, I'll come back to that and carried interest that are made on or after the 30th of October 24. Basic rate of CGT, 10 percent has increased to 18 percent and the 20 percent rate of CGT, well that has increased to 25%. 

[00:20:18] So that's what's that's what's come through. So if a disposal was made on or after the 30th of October 24, no change has been made to the rates applicable to the disposal of residential properties, they remain at 18 percent and 24%. And just confirmation as well that the rates applicable to trustees and personal representatives that as well. 

[00:20:38] Also increased from 20% to 24% from the same date confi confirmation as well that the CGT annual exemption that does remain remember, 3000 pound for 25, 26. And another area where there'd been a lot of rumors that we might see some changes, of course, was to things such as business asset disposal relief. 

[00:21:03] And quite simply, what's happened here. Is the government have announced that the business asset disposal relief is going to increase from 10 percent to 14 percent that will be for disposals made on or after the 6th of April 25. But in the following year, the rate is again going to increase to And that is in relation to disposals made on or after the 6th of April, 26. 

[00:21:32] The other one I thought I would mention as well, just in case it is relevant for any clients, the lifetime limit for investors relief. Remember that? That had remained at 10 million pounds. That didn't reduce to the 1 million pound when we had those changes to BADR. Well, what the government have confirmed is that the lifetime limit for investors relief, that has been reduced to 1 million pounds. 

[00:21:55] And that is in relation to disposals, qualified disposals, that are made on or after the 30th of October 2024. And that limit will indeed take into account any Prior qualifying gains where that relief had previously been claimed. So as thought, we've had a bit of tinkering on the CGT rates, not as not being aligned with the main sort of, you know, the income tax rate is such that 40, 45%, which was of course rumored to be happened. 

[00:22:24] But a few changes there, obviously to talk to clients talk to clients about moving forward. Indeed, talking about rates, etc. We've had other changes, some interesting changes on some aspects of employment taxes. That's right, isn't it, Pat? And I think you were going to elaborate on one or two of those particular points. 

[00:22:44] So if I can hand that point over to you to pick up.  

[00:22:48] Norman Allison: Okay, so first of all, of course we've got the the well, well rumored or speculation that we would have an increase in the employer's national insurance rate, given that, of course, national insurance for the worker, Of course . . Has there been this debate about exactly what a worker is? 

[00:23:09] Has been quite interesting in itself. Yes. But employer national insurance increasing is certainly going to hit any sizable employer. One of the reasons why it won't affect the smaller employer is because there is effectively a double change here. So. Whilst we've got the increase in the employer national insurance rate by 1. 

[00:23:33] 2 points, as they call it, so from 13. 8 percent to 15%, they have increased the employment allowance from 5, 000 to 10, 500.  

[00:23:49] And that's interesting for a typical small owner. Because one of the little planning hacks that I often go through the numbers on on my courses is demonstrating that maybe for a small husband and wife company, it's sensible, obviously, to take out a salary. 

[00:24:14] Nowadays, I would be recommending taking out a salary, which was at least equivalent to the personal allowance. If you've got employment allowance available, because the fact that you're going above the national insurance trigger for the secondary threshold doesn't matter. Because you've got your employment allowance to, that effectively covers the employer national insurance. So the fact that they've also reduced that secondary threshold they've reduced it from 9, 100 down to 5, 000. If of course you, that means you start to pay employer national insurance early and at a higher rate. And actually what's really interesting because I did these numbers for the budget webinar. 

[00:25:03] But if you took out a salary of 12, 5, 7, 0 for in 24, 25 that would trigger employer national insurance of just under 479 pounds. But the changes in reducing the threshold and increasing the limit actually means that it's now 1, 135. That's quite a big change, isn't it?  

[00:25:32] Speaker 4: It  
 

[00:25:32] Norman Allison: certainly is. But if you've got the employment allowance, because there's only like a two director company, it doesn't Because that's swallowed up by the employment allowance. 

[00:25:43] So you don't actually have any additional employer national insurance cost. And of course the reason why we've been taking out a higher minimum salary is to also the companies who are paying 25 or 26 and a half percent tax, it actually, of course we're getting a nice, healthy corporation tax relief on that. 

[00:26:05] And so it's a nice little planning hack for the smaller company. I would like to caveat that and you know, I think what I'm going to say Can't use it for single director companies. You've got to have at least another employee That triggers some employer national insurance at some point during a tax year So, yeah, so that's all quite interesting, but you know, although I've given you a nice little hack there, the reality is your larger employers, this is going to be a significant cost. 

[00:26:36] I wonder whether, I'm sure our group financial officer has probably already calculated what the impact of this is on the Wilmington PLC employer national insurance cost is. Like obviously we're a big group, so it's likely to be like to be a significant amount, isn't it? I wonder whether I should eat man and ask him what's the impact of this for the group. 

[00:26:59] Unfortunately, extra costs means lower profits. And that obviously is not a good news for, you know, Remuneration and bonuses is it but you know, relatively lucky. But there are also a couple of other really interesting things in relation to vehicles that came out yesterday. And one of which I don't think most people have spotted yet. 

[00:27:28] But I've got to start with the double cab pickup debacle, as they call it. Oh my goodness, I mean. On the 12th of February this year, 24 of course it was announced that they were going to treat double cab pickups from the 1st of July, 24, as cars. Yes. And then I remember this area because I was about to do a a course for one of our in house clients. 

[00:27:56] So I wrote some examples and said, this is going to be the effect, blah, de, blah, de, blah. And then before I actually delivered that course next week, because exactly one week later they did a complete U turn and said, oh sorry farmers, sorry motor transport industry we've changed our minds and withdrew all the new guidance and said, What we're going to do is we're going to instead legislate to treat the double cab pickup as a commercial vehicle. 

[00:28:29] Speaker 4: And  
 

[00:28:29] Norman Allison: I thought this was a really strange move because I'm thinking, and I've been saying this on courses, how are they going to be able to justify this? How is the legislation going to distinguish between the white van It was the subject of the Coca Cola case, as it's known. Oh,  

[00:28:51] Speaker 4: yes.  
 

[00:28:52] Norman Allison: Various models, wasn't it, of white van, where it was possible  

[00:28:58] Speaker 4: to  
 

[00:28:58] Norman Allison: have that row of seats, you know. 

[00:29:00] You know, you know, squash this row of seats in behind the driver's cab with or without a window and yet the double cab pickup is far more luxurious. So how can you say the white van is a car, which was the outcome of that case, but that the double cab pickup is a commercial vehicle with all of the, Advantages that gives with the annual investment allowance with the much lower employment benefit position. 

[00:29:30] Unbelievable. And so we've been waiting for this legislation and waiting. And obviously the new government decided, well, hang on a minute. No, we, they are going to be treated as cars. And the new date for that is April 25. Yes, because we have a court of appeal decision. We can't ignore the, you know, the a senior court decision that says, you know, something that's very similar, in fact, worse quality than a double cab pickup is in fact a car. 

[00:30:04] And so this is going to be a really important action point. Yeah. Because I think they've been really generous here because they've said if you actually buy your double cab pickup before the 31st of March, if it's a corporate 5th of April, if it's an individual, you will get annual investment allowance and what's more we'll actually treat you under like as a van for benefit and kind purposes until there's a couple of different dates, but potentially. 

[00:30:35] until the 5th of April, 29, is the last date. Yeah, so we've effectively given you another four years worth of actually a very privileged position, so I don't think Jeremy Clarkson, because it's farmers that often have this argument about the double cab pickups can complain too much.  

[00:30:54] Pat Nown: No.  
 

[00:30:56] Norman Allison: So that was a bit of a shocker, but then I found something that's hidden away, which people also need to be aware of. 

[00:31:04] And that's in the announcements of the company car benefit changes. 30 now, as we would expect, there is going to be an increase of two percentage points in each of those years for electric cars a 1 percent for most other cars, but it's the hybrids. Where the, there's a change in the technical rule. 

[00:31:28] So at the moment, if you have a hybrid that has CO2 emissions of between one and 50 50 inclusive then the percentage for company car benefits is based upon the electric power component, i. e. how many electric moles it So some of the really good quality hybrids actually have a taxable benefit, which is as low as can be as low as the electric car. 

[00:31:57] In fact, there's a range, right? So currently the range, I think, is about something like 2 to 15 percent. Well, they've decided to abandon that concept and they're all hybrids in the range 1 to 50 will simply be taxed at the highest percent, appropriate percentage, which means just to give you an example, somebody could have a hybrid in 27, 28, that is taxed as 8%. 

[00:32:26] Speaker 4: Yeah.  

[00:32:26] Norman Allison: Because the electric range is about 120 miles, but in 28, 29, that jumps up to 18%. Because they're doing this flat rate approach  

[00:32:40] Speaker 4: on that  

[00:32:40] Norman Allison: range. Now that's a very big change. It is. Which I don't think a lot of people have particularly picked up on yet. I know it's a lot of me talking, isn't there? 

[00:32:51] Maybe you want to what else do we think is worth sort of, highlighting to our listeners on budget developments yesterday?  

[00:33:01] Pat Nown: Well, I was just going to very briefly mention, Pat, the changes to SDLT. I thought just just about a minute or so reminding participants about this, because effectively what the government had done. 

[00:33:13] done for individuals who have purchased additional residential properties. So for example, your second homes, you buy to let properties in England, Northern Ireland, generally they will pay SDLT at 3 percent above the standard SDLT rates, but the government have increased that to 5 percent for transactions, which have an effective date. 

[00:33:36] And that is usually the date of completion. On or after the 31st of October 24. So the 3% has gone up to 5%. We've also had similar changes being made for companies and other non-natural persons who purchase residential property in England and Northern Ireland. And I thought I'd remind us as well that in addition. 

[00:33:58] There's also an increase in the single rate of SDLT payable again by companies and other non natural persons when they've purchased residential properties worth more than 500, 000 and that has gone up from 15 percent to 17 percent from the same date. The final point I thought worthy of a brief mention is as well is that the 0 percent band up to 250, 000 remember that It effectively expires on the 31st of March 25. 

[00:34:31] And from the 1st of April, it revert back to the more familiar 125,000 pound at naught percent. So, bit of tinker in there, really on the SDL tax changes. And I think to finish off, pat, you were just gonna give a brief overview on some of the changes to non domes.  

[00:34:51] Norman Allison: Well, brief will be the operative word because this is, of course, a hugely complex piece of, and we do now have draft legislation and obviously the legal firms in particular that specialize. 

[00:35:05] It's certainly in terms of your high net worth doms will be working, no doubt, burning the midnight all over the next week or so to analyze aspects of this to then be able to relay the impact for clients. I did read something yesterday and I went and had a quick look at the draft legislation on this. 

[00:35:25] So it does seem that the, that or a trust, for example, and we're talking about an overseas trust. that was set up before the 30th of October 24, where a settler was non domiciled at the time and has an interest in possession in that trust, that on their death, that actually may well not be included in their IHT estate at death. 

[00:35:52] And this is, this has suddenly come out of the blue in terms of some transitional provisions. So that's actually, I mean, you know, We've gotta sort of dot the i's and cross the T's on that. But it does seem that they're, I'm not gonna call it concession, but maybe for some of those with overseas trusts who, which are already established, the IHT impact of the changes may not be quite as serious as we thought it was, but. 

[00:36:22] On the whole, this is going ahead. They're adamant that this is going ahead from 6th of April 25. This is a fundamental change to the way in which we deal with inheritance tax, income tax, and CGT. For what are known as the non doms. We're moving to a residence based system. But yesterday did give us some additional clarification on how aspects will work. 

[00:36:51] So, just with inheritance tax. What they've said from the start, originally conservatives, then obviously labor, because initially it was a labor idea and the conservatives sort of picked them at the post by starting the process in a spring budget. But what they've said all along is this concept of, for IHT, if you are resident for 10 years, You are then 10 consecutive years, you are then within the scope of UK IHT on worldwide assets as an individual. 

[00:37:26] And then you, there was this idea that said you would remain in scope for 10 years after departure. Well, That has been modified now. So it will be if you're resident 10 out of the previous 20 years, at that point you will be classed as a long term resident and therefore you are caught for IHT and you will remain in scope if you then leave for somewhere between 3 and 10 years. 

[00:38:00] on how long you're resident for. So for example, if Melissa as an example, I used yesterday, I'd been resident for 13 out of the last 20 years.  

[00:38:12] Speaker 4: Yeah. Yeah.  

[00:38:13] Norman Allison: So she would be from 6th of April, 25. Within the UK worldwide inheritance tax scope, but if she then decided to leave because she's only been resident for 13 out of the last 20 years, it will only take her three years non UK residents to lose being within the scope of IHT. 

[00:38:38] been resident for 15 years out of the 20, it would only take her five years.  

[00:38:45] Pat Nown: Right.  

[00:38:45] Norman Allison: So that is a quite important change on the inheritance tax side. Now, apart from the point I've made, I'm not going to make any more points about trust because everything is so complicated. Pretty much the announcements that we'd already had at some point, Spring and in July about how it will work for income and gain supply. 

[00:39:09] So basically all UK residents will be on an arising basis for income and gains, unless it is your first four years of residence. In the UK, right? In which case you can make a claim to have your foreign income and gains exempt. So that, there's no change there, that's confirmed. What has been modified though, is that if you are already on a remittance basis then you will be able to rebase your foreign assets, but the date of rebasing is now going to be April 17. 

[00:39:50] Pat Nown: Okay.  

[00:39:51] Norman Allison: And if you bring in any overseas income once the new regime is up and running and you're on an arising basis, if you bring in any overseas income and gains from that arose before the 6th of April 25, you will for three years there will be a special rate of tax charge, so 12% for 25, 26, and 26, 27. 

[00:40:16] And then a third year has been extended, but the rate will then be 15%. So, so some slightly slight concessions almost we could say. But there's a lot more detail that will need to be drawn out on this for clients affected. And of course, let's be clear on the IHT side of things that affects UK Doms as well as non UK Doms. 

[00:40:43] In terms of those that want to, for example, emigrate and then how long they will be within the scope of UK IHT. You know, for example, somebody who sells their business and decides to retire overseas. So the rules are equally applicable in terms of how the IHT rules work there. And so, yeah, it is about time to round up. 

[00:41:05] I know we've not really talked about company and business, but there wasn't really anything, any significant change really that we did already know about. But they are starting and I know it's always, we're always interested as tax advisors in our own position, but the raising standards in the tax advice market the first steps. 

[00:41:29] To improve that will require mandatory registration for tax practitioners who interact with HMRC from April 26. So we're let off the hook. Norm because we don't actually interact with hmrc, but obviously all our all you guys who are client Who are practitioners out there? This will apply to you We don't really have any detail on that this yet apart from the fact that a requirement of registration Will be that there will be An aml anti money laundering check and that your own tax affairs are up to date You there will be additional steps to strengthen regulation in the future. 

[00:42:17] But the mandatory registration is the first step, probably in a long process of trying to ensure that, you know, it is properly qualified, experienced, and up to date people who are actually advising the general public out there.  

[00:42:36] Speaker 4: Yes,  
 

[00:42:36] Norman Allison: and I think on that note, that is probably all from us today. 

[00:42:42] I hope you've enjoyed our little chit chat from Norm and myself on post budget. Obviously, I'm sure there's going to be a lot more detail coming out over the next few months on some of the critical areas. So that's thank you from me and for me as well. Okay. Thank you. Bye. Bye.