The things that you and your clients REALLY need to know
Immediately after the Budget, you will have been inundated with budget ‘instant’ reactions, rapid-fire summaries and social media posts.
However, at ETC Tax, we like to take a little extra time to get our Budget content out to you to ensure it is as useful as possible.
With that in mind, below are the parts of the Budget that we think will matter most to our network of professional advisers and their and our clients.
If you or your clients have a property rental portfolio.
Unfortunately, landlords have taken another ‘hit’ in the Budget with tax rates on rental income to rise by 2% from 2027–28, and dividend tax rates also increasing by 2% for basic, higher and additional-rate taxpayers from 2026–27.
This means that whether you hold property personally (as a sole trader or in partnership) or through a company (and take income by way of dividends), you will feel the impact.
For some landlords, incorporation may still make sense, especially where borrowing is high, profits are retained, or you’re building a long-term property portfolio, but the gap has narrowed and the benefits are now far more marginal.
If you’re unsure whether to stay as you are or restructure, we can help you understand the impact on your numbers both before and after the new rates take effect. We can model the figures, compare structures and give you a clear view on what is most tax-efficient for you.
Incorporation is not right for everyone, and given that HMRC also announced at the budget that those relying on incorporation relief will now need to formally claim it on their Self-Assessment tax return for the year of transfer (including details of the transaction, tax computations and the nature of the business transferred) as part of wider anti-avoidance measures, if you are considering incorporation, it is now even more important to take specialist tax advice. We can help. Click here to view our property tax section on our web.
If you or your clients are concerned about your inheritance tax position
Transferable £1m allowance
As announced in last year’s Budget, from 6 April 2026, a new £1 million allowance will apply to the combined value of property in an estate qualifying for 100% Business Property Relief or 100% Agricultural Property Relief. Any qualifying relievable property over £1 million will receive tax relief at 50%.
It was originally proposed that the £1m allowance could not be transferred between spouses. However, this year’s Budget now amends this so that any unused amount of the £1 million allowance can be transferred to a surviving spouse or civil partner from 6 April 2026. If the first death was before 6 April 2026, it will be assumed the entirety of the £1 million allowance will be available for transfer to the surviving spouse or civil partner.
In addition, the option to pay Inheritance Tax by equal annual instalments over 10 years interest-free will also be extended to all property which is eligible for agricultural property relief or business property relief. This will be particularly helpful to those estates that are “asset rich, cash poor”.
IHT due on pension funds
At Autumn Budget 2024, it was announced that personal pension funds would be subject to IHT from 6 April 2027.
It was originally proposed that pension scheme administrators would be liable for reporting and paying any Inheritance Tax on the pension element of an individual’s estate. However, following consultation, this year’s budget announced that personal representatives, rather than pension scheme administrators, will be liable for reporting and paying any Inheritance Tax due on unused pension funds and pension death benefits from 6 April 2027. It also confirmed that death in service benefits payable from a registered pension scheme will remain outside the of scope of Inheritance Tax which is welcome news.
Further freezing of IHT rate bands and reliefs
The Nil Rate Band of £325,000 has been fixed at £325,000 since 2009/10. It will now remain at that rate until 2030/31.
Similarly, the Residence Nil Rate Band (RNRB) will remain at £175,000 until 2030/31.
The £175,000 RNRB is available to those passing on a qualifying residence on death to their direct descendants. A taper reduces the amount of the RNRB by £1 for every £2 that the net value of the estate is more than £2 million. This limit is also frozen until 2030/31.
The government announced at Autumn Budget 2024 that the new £1 million allowance will apply to the combined value of property in an estate qualifying for the 100% rate of APR or BPR. This limit has also been frozen until 2030/31.
IHT anti-avoidance
Previously, individuals who are not long-term UK residents could avoid IHT by placing business/agricultural property in offshore structures. As these would not be UK-situs assets, no IHT would be due.
Legislation will be introduced which will allow HMRC to look-through non-UK companies or similar bodies to treat UK agricultural land and buildings as situated in the UK for IHT purposes. This will be effective from 6 April 2026 but will apply to any transfers of value from Budget day (26 November 2025).
This follows the existing treatment for UK residential property for IHT introduced from 6 April 2017.
There will be some transitional relief for trusts in existence as at 30 October 2024 with IHT charges capped at £5m per trust.
Finally, in line with other taxes, IHT charity exemption will be restricted to gifts made directly to UK charities and community amateur sports clubs. Gifts to trusts which do not meet the required charity or club definition will not be exempted as they may not have UK jurisdiction or be regulated.
What’s next?
We recognise that inheritance tax is something a lot of our clients feel passionately about, and at ETC Tax we have extensive experience helping clients structure their affairs to allow them to pass on as much of their wealth to their families as they can within the remit of what is possible.
If you or your clients would like advice on IHT, estate and succession planning matters whether relating to personal or business wealth and whether your assets are held in the UK or overseas, please do get in touch and we would be happy to help – click here to view our IHT section on our website.
If you or your clients have cryptoassets
Whilst the Autumn Budget did not alter how crypto gains are taxed, there were changes to the reporting framework for crypto assets.
The UK has now implemented the OECD’s Cryptoasset Reporting Framework (CARF) and aligned it with the existing requirements for Reporting Cryptoasset Service Providers (RCASPs). RCASPs are exchanges or platforms that facilitate the trading or management of cryptoassets such as Binance and Kraken.
Under the updated rules, which take effect 1st January 2026, RCASPs must gather information not only on customers who live outside the UK, as they currently do, but also on UK-resident users. This information will be exchanged automatically between jurisdictions. As a result, HMRC will receive annual CARF data covering all UK taxpayers who use either UK-based or overseas RCASPs. With estimates suggesting 12% of UK adults own some form of crypto assets, and some of those no doubt using overseas RCASPs, there is no doubt that that the new reporting standards will uncover some non-disclosed crypto activity.
This information is designed to provide HMRC with consistent, structured data to strengthen compliance work, address tax avoidance, and help ensure taxpayers meet their reporting obligations.
With HMRC gaining access to much more detailed information, keeping your crypto records accurate and up to date is more important than ever. If you require support with bringing your crypto position up to date, historic disclosure of your crypto activity, and/or in year reporting, please contact us. Click here to view the crypto section on our webiste.
If you or your clients are moving overseas
Post-departure profits
The government is abolishing the long-standing “post-departure trade profits” exception. As a result, any dividends or distributions taken from a close company while an individual is temporarily non-resident will become taxable on their return to the UK, irrespective of whether the underlying profits arose after departure or not.
Under current rules, UK-resident individuals who leave the UK but return within five years may be taxed on income such as capital gains realised while abroad. However, distributions from close companies have historically fallen outside this where they relate to post-departure profits.
From 6 April 2026, this distinction disappears.
The revised rules provide that:
The timing and origin of the profits no longer matter.
All dividends taken while temporarily non-resident will be subject to UK tax upon return.
Anyone returning within five years is likely to fall within the scope of the charge.
Example
A UK-resident director relocates to Dubai in 2023 and remains non-resident for three years. During that period, they withdraw £300,000 of dividends from their UK close company. Under the current framework, it may be argued that the dividends relate to post-departure profits and should not be taxed in the UK.
However, if the individual returns to the UK in August 2026 and within the five-year temporary non-residence period, the full £300,000 will be taxable. The origin of the profits becomes irrelevant. Any foreign tax may provide limited relief, but the UK tax charge will still apply.
Abolition of the dividend tax credit for non-UK residents
Non-UK residents who receive UK dividends and also have UK rental income or partnership income currently benefit from a notional tax credit at the ordinary dividend rate, often reducing or eliminating a UK liability.
From 6 April 2026, this credit is abolished. Non-residents will instead need to choose between:
Being taxed on all UK income and claiming a Personal Allowance, with dividends taxed at normal UK dividend rates; or
Being taxed only on UK rental/partnership income, but without a Personal Allowance.
From 6 April 2026, employers applying in-year PAYE relief for non-UK resident employees with mixed UK and overseas duties will be subject to a new 30% cap on the proportion of pay that can be excluded under a PAYE direction.
Historically, this 30% limit applied only when an employee made an OWR claim through Self- Assessment.
This change ensures that in-year PAYE exclusions align with the maximum relief available via a tax return, reducing the risk of underpaid tax. Previously, employers often excluded a larger share based on anticipated overseas work.
Example
An employee earns £120,000 while performing duties both in the UK and overseas. Historically, an employer might have excluded 50–60% from PAYE. From 6 April 2026, only 30% (£36,000) may be excluded. The remainder will be subject to PAYE in the normal way.
What’s next?
We are receiving more and more enquiries from clients looking to leave the UK, and have helped many clients successfully navigate this change. If you need help with any matters relating to relocating overseas (whether individual or corporate) please get in touch.
If you or your clients are subject to the loan charge
As you may be aware, the government commissioned an independent review of the loan charge in January 2025, and the findings of that have now been published resulting in the government accepting all but one of the recommendations. As such, HMRC will now implement a new settlement opportunity for those affected by the loan charge, who have not yet agreed a settlement with HMRC.
This settlement is designed to substantially reduce tax liabilities, particularly for those on lower incomes.
Key features of the new settlement opportunity include:
Tax liabilities recalculated using the tax rates in place when loans were made, rather than 2018/19 rates;
Reductions to reflect historic promoter fees i.e if you paid promoter fees as part of your loan scheme agreement, the amount you paid per year can be used to reduce your tax liability, subject to a cap of £10,000 per year;
A flat write-off of the first £5,000 of tax due per person, applied to the recalculated amount, to provide additional help for those on lower incomes;
No late payment interest will be charged on the re-calculated liability;
Any inheritance tax linked to loan scheme use is to be written off;
Flexible payment arrangements tailored to an individual’s ability to pay, with an automatic option to spread payments over five years (though forward interest will apply).
Although these appear to be some positive changes, this does come with the caveat that no re-calculated liability can be reduced by any more than £70,000. However, the government suggests that most individuals (80%) will not be restricted by this cap as most liabilities appear to be lower than this.
Points of caution
It’s important to be aware that HMRC has not yet clarified how it will distinguish loan schemes from other disguised remuneration arrangements. Some taxpayers have already been told their cases fall outside the scope of the review, so you should not assume that you will automatically qualify for the opportunity. While the new settlement terms may offer significant reductions, the outcome will depend on HMRC’s assessment of your individual circumstances.
What next?
HMRC has previously written to those taxpayers who may be affected during the review process, and from January 2026, your named HMRC contact will confirm you whether your arrangements fall within the scope of the new settlement terms. If so, you should receive an invitation to settle at a reduced amount.
Alternatively, you can register your interest in settling under the new terms by contacting HMRC immediately.
If you have not yet settled your loan charge liability, this settlement opportunity could help reduce what you owe.
We can help you understand how the new terms apply to your position, check your figures and support you in preparing the information HMRC will need – if you need assistance, please contact us.
Other things you should be aware of:
Changes to Corporation Tax Penalties
The proposed legislation doubles the current penalty levels for late filing of Corporation Tax returns. Under the revised regime, the penalties will be:
£200 for a late return
£400 where the return is more than three months late
£1,000 for three consecutive late filings
£2,000 for three consecutive filings more than three months late
This represents a significant tightening of the penalty framework and reinforces the importance of timely compliance.
EMI – Increased Limits from 6 April 2026
For EMI options granted on or after 6 April 2026, the qualifying limits will be substantially increased:
The company-wide limit on unexercised options will rise from £3 million to £6 million.
The gross assets test will increase from £30 million to £120 million.
The employee limit will rise from 250 to 500 employees.
These changes are designed to enable larger scale-ups, as well as early-stage companies, to use EMI to attract, retain and reward key employees more effectively.
EIS and VCT Reforms
The government is increasing several thresholds within the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) regimes to enhance support for early-stage and growing companies. The key changes include:
Increasing the gross assets limit for EIS and VCT eligibility to £30 million (previously £15 million) immediately before the share issue, and to £35 million (previously £16 million) immediately after.
Raising the annual investment cap to £10 million (from £5 million) for standard companies, and to £20 million (from £10 million) for knowledge-intensive companies.
Doubling the lifetime investment limit to £24 million (from £12 million), and to £40 million (from £20 million) for knowledge-intensive companies.
Reducing the rate of Income Tax relief for VCT investors from 30% to 20%.
These measures widen access to growth capital while repositioning the reliefs available to investors.
ATED – out-of-time relief claims
As a reminder, the Annual Tax on Enveloped Dwellings (ATED) applies when all three of the following conditions are met:
A “non-natural person” owns the property i.e. a company or collective investment vehicle
The property is a UK residential dwelling
The property is worth more than £500,000
However, some companies don’t actually have to pay ATED, because they qualify for a relief, such as lettings relief or property development relief.
However, previously, ATED relief had to be claimed within a strict statutory deadline (12 months following the chargeable period), using the normal ATED return or amendment process. Missed claims meant a full ATED charges applied.
This strict out-of-time limit for relief claims is removed, and a valid claim to reduce the ATED charge may be submitted at any date, although late filing penalties will apply as they always have.
Reduced CGT relief on disposals to Employee Ownership Trusts (EOTs)
Previously, individuals or trustees disposing of shares to a qualifying Employee Ownership Trust (EOT) could claim 100% CGT relief, meaning no Capital Gains Tax was payable if the conditions were met.
From 26 November 2025 relief is reduced from 100% to 50% for disposals on or after that date, meaning 50% of the gain is immediately taxable; but the remaining 50% is deferred.
Other CGT reliefs (e.g., Business Asset Disposal Relief) cannot be claimed on the same disposal.
Please do get in touch to discuss any aspect of this budget document and/or for specialist help with any other tax matters.
As the Chancellor prepares to deliver the Budget on 26 November 2025, uncertainty continues to build for businesses and individuals alike. Normally, the Budget comes in October, but this year’s delay has extended the period of speculation and left many waiting much longer than usual for clarity. Unsurprisingly, this has only heightened the sense of unease around what changes may be on the horizon.
At ETC Tax, we’re not aiming to predict the Chancellor’s exact announcements. Instead, we’re looking at the areas that are most likely to feature, so you can start to think ahead. Whether you are reviewing corporate structures, assessing your personal tax position, or planning future investments, considering the possible outcomes now may help you react quickly once the Budget is delivered.
Income Tax and National Insurance
There has been repeated discussion in recent months about the possibility of increasing income tax rates. At one point, reports suggested the Government was considering a 2p rise, alongside a further extension of the frozen thresholds through to 2030. Had this gone ahead, it would have marked the first change to the main income tax rates in decades.
To balance this, a matching 2p cut in employee National Insurance was reportedly under consideration. However, following the Chancellor’s recent comments ruling out an income tax rise, this reduction now appears unlikely.
Instead, the Government may prefer to continue increasing the tax burden on higher earners through fiscal drag. By keeping thresholds frozen while wages rise, more people are pushed into higher tax bands without any explicit rate increases – allowing ministers to avoid breaking their election pledge.
Inheritance Tax
Inheritance Tax is widely expected to play a central role in the upcoming Budget. The changes announced last year confirmed that unused pension funds and lump-sum death benefits will fall within the IHT net at 40% from April 2027. In addition, the scope of agricultural and business property relief was narrowed. With this direction of travel in mind, further reform would not be surprising.
Lifetime gifting remains one of the most effective ways to pass on wealth while reducing IHT, provided the donor survives seven years and gives up all benefit in the asset. However, several ideas have been floated that could restrict this area of planning, including:
A potential lifetime gifting cap (possibly around £100,000)
Limitations on taper relief for gifts made between three and seven years before death
Extending the seven-year surviving rule to ten years
Continuing the freeze of the £325,000 nil rate band until 2030
Reducing the £175,000 residence nil rate band
For those with significant estates, such changes could mean revisiting existing planning or reconsidering strategies they had intended to implement.
Property Taxes
Property taxation is also expected to come under scrutiny. A range of possible measures has been reported, including changes to council tax, Stamp Duty Land Tax (SDLT), and even the introduction of a “mansion tax.” One proposal that has gained attention is an annual 1% charge on any excess in properties valued above £2 million, which would mean, for example, a £10,000 annual tax bill for a £3 million home
There has also been talk that SDLT may be abolished altogether or restructured, with liability shifting to sellers for properties over £500,000. The Institute for Fiscal Studies has warned that increasing property transaction taxes could harm the housing market by discouraging moves – particularly for those looking to downsize, upsize, or relocate for work.
Additionally, some reports suggest that council tax could be reformed, with extra charges applied to homes sold for more than £1.5 million. Taken together, these changes would significantly increase the cost of owning high-value homes and investment properties, which would be of particular concern to property investors and high-net-worth individuals.
Capital Gains Tax
Capital Gains Tax is another area under the spotlight. One of the more prominent ideas discussed is capping the private residence exemption for main homes. At present, individuals do not pay CGT when selling their main residence, but some commentators have suggested introducing a limit for higher-value properties – possibly in the £1.5 – £2 million range.
Other proposals that have surfaced include an “exit tax” for individuals leaving the UK and the removal of the CGT base cost uplift on death. Both measures would increase the tax burden on inherited or relocated assets. However, recent reports suggest these particular ideas may be unlikely to progress, partly due to concerns that they could discourage inward investment or deter internationally mobile individuals from coming to the UK.
Corporation Tax
While there is currently no clear suggestion that the main rate of corporation tax will rise, business owners may still see indirect increases through fiscal drag or changes to allowances and reliefs. These adjustments can have a material impact on company profitability and reinvestment decisions, so it will be important for business owners to pay close attention to the announcements.
On the VAT side, the registration threshold is expected to remain frozen at £90,000. With inflation pushing turnover levels higher, this freeze will inevitably bring more small businesses into scope.
Looking Ahead
With the Budget now only days away, significant uncertainty remains. We have focused here on the areas where speculation has been strongest and where any changes could have the most meaningful impact on businesses, property owners, and higher earners.
Once the announcements are made, we will be reviewing the details closely and sharing our insights. If you are considering how any of the potential changes could affect you, please get in touch with ETC Tax.
A new review of the 2017 Loan Charge legislation is now underway, led by Ray McCann, former president of the Chartered Institute of Taxation (CIOT).
Announced in the Autumn Budget, HM Treasury has recently provided further details on what this review will entail.
A Brief History
The Loan Charge legislation has had a significant impact on many contractors, including those on lower incomes, who were mis-sold tax schemes.
Before 2017, HMRC sought to reclaim lost revenue from arrangements it deemed to be tax avoidance. These disguised remuneration schemes involved individuals receiving payments as loans rather than salaries, often through trusts. These loans were never intended to be repaid, allowing users to avoid Income Tax and National Insurance Contributions (NICs).
A key turning point was the Rangers Case, in which HMRC successfully argued before the Supreme Court that such schemes were unlawful tax avoidance. This ruling provided justification for HMRC to pursue individuals and businesses that had used similar arrangements.
As a result, the Loan Charge legislation was introduced to target outstanding disguised remuneration loans dating back to 1999, with the charge itself applied as additional taxable income in the 2018/19 tax year. This led to unexpected and often devastating tax bills for thousands of individuals, many of whom had participated in these schemes based on professional advice.
Critics argued that the Loan Charge amounted to retrospective taxation, which was unfair. MPs, campaigners, and the Loan Charge Action Group called for its suspension and review. In response, the government commissioned an independent review by Sir Amyas Morse in December 2019, which led to key changes:
The charge was limited to loans taken after December 9, 2010 (instead of 1999).
Those who had fully disclosed their schemes to HMRC but were not investigated were exempted.
A spreading election was introduced to reduce tax liabilities by allowing payment over several years.
Despite these modifications, the Loan Charge remains highly controversial, with ongoing debates about its fairness, legality, and impact on affected taxpayers.
What Can We Expect from the New Review?
Unlike the first review, which examined the history and fairness of the Loan Charge, this new review is not about revisiting the legislation itself. Instead, it focuses on ensuring those with outstanding liabilities can resolve them with HMRC in a fair and structured way, without compromising general fairness for taxpayers.
McCann has been tasked with reviewing:
The current settlement terms in place for affected taxpayers.
The effectiveness of HMRC’s settlement and debt management processes.
Ways to help those who have not yet settled reach a resolution with HMRC.
How new settlement proposals can be targeted effectively while avoiding excessive administrative burdens for HMRC.
From the available information, the review appears to focus more on procedural improvements and individuals’ ability to pay, rather than reducing tax liabilities or reconsidering the fundamental fairness of the Loan Charge.
A statement from HMRC makes this clear:
“Solutions should not undermine the fundamental principles of the tax system—that individuals are responsible for their own tax affairs and that tax owed should be paid. Given our approach to closing the tax gap and the fiscal position, we will not be able to accept recommendations that do not meet these criteria.”
The review is expected to conclude in Summer 2025, with the government’s response anticipated in the next Autumn Budget.
How Will This Affect You?
HMRC has also outlined how it will communicate with affected taxpayers:
Assigning a named HMRC contact for each case (if not already assigned).
Clarifying whether a taxpayer’s arrangements fall within the scope of the review.
Explaining next steps for those affected.
Unlike the previous review, this one does not appear to consider repealing or softening the Loan Charge itself. Instead, it focuses on how HMRC can improve processes and encourage taxpayers to settle.
If you are affected, you may have the option to pause any ongoing HMRC enquiries until the review is complete. However, it is unclear:
Whether HMRC will allow this in all cases.
If pausing an enquiry will even be beneficial, as interest on unpaid tax will continue to accrue.
Ultimately, the Loan Charge remains in force, and this review does not appear to offer significant relief in terms of reducing tax liabilities.
Next Steps
For those impacted, it is advisable to seek professional tax advice and remain updated on developments as the review progresses. Please do get in touch
The recent announcements of tax increases in the October 2024 Budget have continued to spark a rise in the number of enquiries we receive from individuals considering relocating abroad.
One of the questions we often get asked by clients looking for advice is what the preferred destinations are, or seem to be, for people wanting to leave the UK.
Let’s take a look….
Whilst countries in Europe, like Portugal and Spain have traditionally been top of the list, following the abolition of the Non-Habitual Resident (NHR) Tax Regime (which was officially discontinued by the Portuguese government in 2023) we have definitely seen a reduction in popularity of Portugal as a destination of choice.
Unfortunately, Spain, which has proved popular with clients, seems to be following suit following the announcement that the Golden Visa programme (an immigration programme that allows individuals to gain residency in a country by making an eligible investment there), which was the preferred route to residency in Spain, is also to be abolished by Spain on 3rd April 2025.
Indeed it appears that even staying in the UK, but living part of the year in Spain may not be an option now either, following the recent Spanish government announcement (13th January 2025) that it plans to introduce a tax of up to 100% on properties purchased by non-residents from outside the EU. [1]
So what options remain for those wishing to relocate abroad?
In a recent survey of professional advisers with internationally mobile high net-worth clients, the top destinations for those leaving the UK were Dubai (no income tax – what more is there to say!!), Italy (which as well as having a relatively attractive tax regime is doing a lot at the moment to encourage foreign investment and relocation[2]), and the “old favourites” like Malta, Cyprus, the Isle of Man and the Channel Islands. We also find we speak to quite a number of clients interested in moving to Barbados (well if the low tax rates aren’t appealing enough the palm trees and beaches certainly will be!).
A quick google suggests a number of different countries topping the list, like Australia, the USA , and France. However, with many of the clients we speak being driven by a desire, not for cultural or lifestyle changes, but to reduce their overall tax burden, these countries are unlikely to popular destinations for UK expats motivated by tax planning (…certainly not given that the US has one of the most complex and all-encompassing tax regimes of any country in the world!!).
Whilst it is not our job to advise clients on which country might suit their needs (whether cultural, family, lifestyle or tax/financial) we find ourselves having regular conversations with clients who know they want to leave the UK but are open to where they go, and can help introduce clients to advisers in other countries who can advise them on the local tax position.
How we can help
Those moving themselves, or their businesses, overseas face unique tax challenges.
At ETC Tax, we have specialists in global mobility tax issues who can advise employees, employers and/or business owners on their UK tax position when leaving the UK as well as help advise on their ongoing compliance and reporting obligations.
Our advice covers key areas such as residence, domicile[3], rental income from UK properties or other UK-sourced income, and non-resident capital gains tax. We also specialise in advising non-UK domiciled individuals on their UK tax position and planning for tax-efficient remittance of funds to the UK.
Finally, we can also provide support with UK tax returns for those with overseas aspects to their tax affairs, remittance basis claims, and overseas workday relief applications.
Next Steps
Whether you’re an individual navigating cross-border tax issues, a business operating internationally or a professional adviser assisting clients with these issues, feel free to get in touch to discuss things in more detail.
[1] Although the finer details about the implementation of this policy or the timeline for it are unclear, it is being compared to policies that are already in place in the likes of Canada and Denmark.
[2] Italy rolled out the little-known incentive in 2017, which has proven particularly attractive for high-net worths and super high-net worths. The incentive means that in exchange for paying an annual fee of €100,000 (£87,000), those who become resident in Italy are entirely exempt from paying tax on income generated overseas.
[3] We can also advise on the upcoming changes to the existing domicile rules (from 6 April 2025) and provide advice and planning in relation to those changes.
A few minutes after half past 12 on 30th October 2024, Rachel Reeves stood up and delivered Labour’s first budget in over 14 years.
Prior to the budget there was much speculation as to the contents of the budget, with Labour remaining fairly tight lipped on likely changes in the budget.
Below we have provided a brief summary, of the changes announced in the 2024 Autumn Budget.
Increases to Living Wage / National Minimum wage
The Living Wage is set to be increased by 6.7% Increase to £12.21 per hour for those aged 21 and above. This increase aims to support workers amidst rising living costs, particularly given recent inflation and accounts for an increase in gross income of circa £1,500 per year (for a full time worker working 37.5 hours per week)
The National Minimum wage (payable to people aged 18-20) will increase substantially by 16.3% to £10 per hour.This substantial rise aims to address youth wage disparity and ensure young workers can keep pace with the cost of living. This will be equivalent to an increase in gross income of £2,730 per year (for a full time worker working 37.5 hours per week)
These increases will account for an increase in tax revenues as the more people earn, naturally the more tax they will ultimately pay, however these changes do come with a greater wage cost for employers which could put a strain on smaller businesses particularly those in sectors with large numbers of minimum-wage employees. These changes could result in employers altering their recruitment strategies to remain profitable.
National Insurance Changes
During the budget, Ms Reeves made it very clear that she would not increase taxes for individuals. She did however, announce an increase in employers NIC from 13.8% to 15% from April 2025 as well as decrease the threshold from which employers are required to pay NIC down from £9,100 per employee, to £5,000 per employee.
These changes mean employers will need to pay considerably more NIC for their employees.
Capital Gains Tax (‘CGT’) rates
Due to Labours manifesto promise not to increase tax rates for income tax, corporation tax and VAT, it was highly speculated that the chancellor would target other taxes such as CGT.
Currently, gains on Residential Property have higher CGT rates of 18% for gains within the basic rate band, and 24% for higher rate gains.
All other disposals (apart from Carried Interest) attract CGT rates of 10% and 20% respectively.
Rachel Reeves confirmed in the budget that CGT rates would be increased (from today) to 18% and 24% for all gains going forward.
Carried interest gains, would attract a new rate of 32%
These increases will see individuals who are disposing of capital assets pay a larger percentage of their gain in tax than before with the rate in basic rate gains increasing by a staggering 80% and higher rate gains increasing by a more modest 20%.
Capital Gains Tax (‘CGT’) – Business Asset Disposal Relief (‘BADR’)
Individuals who dispose of business assets can currently benefit from a rate of 10% CGT on their gains providing the disposals meet certain criteria.
In line with CGT increases, there will be an staggered alteration for gains eligible for BADR from the current 10% rate to 14%, and then a further increase to 18%.
The lifetime limit of BADR will be kept at the current level of £1m of gains.
These changes will see individuals who are disposing of business assets that qualify for BADR exposed to an increase in their tax liabilities of 80% on the first £1m of gains…!
Inheritance Tax (‘IHT’)
A very unpopular tax we have in the UK is Inheritance tax. While consecutive governments have been eager to point out that only 6% of estates will ever pay inheritance tax, it remains a highly criticised tax as it’s an additional tax on assets acquired during lifetime from already taxed income.
The freeze on IHT thresholds will continue and there will be no change to the rate of IHT which currently stands at 40%.
The government will however increase IHT takings by taking measures to include inherited pensions within the scope of IHT as well as to restrict the valuable reliefs of Business relief (‘BR’) and Agricultural relief (‘AR).
Currently, on death, shares in closed trading companies, as well as farmlands meeting certain criteria benefit from 100% BR / AR against IHT meaning the full value of those shares / agricultural land does not attract IHT.
Under new rules, a combined £1m limit will be placed on BR and AR qualifying assets with only 50% relief being available on value above the limit. This results in an affective IHT rate of 20% on those assets.
The same applies to shares in Alternative Investment Market (AIM shares) which will also see a 100% relief replaced with a 50% relief.
Closure of the Non-Dom regime
The tax regime designed to benefit non-domiciled individuals who leave their income and gains offshore has proven to be an unpopular one with scandal hitting the headlines over Rishi Sunak’s wife domicile status.
Initially, Labour had pledged to close the Non-Dom tax regime and replace it with a residency based scheme designed to be fair to people coming to the UK temporarily, but to capture UK taxes on overseas income and gains on individuals who call the UK their home.
The chancellor reaffirmed this position in the budget, exclaiming that she will close the perceived ‘tax loophole’ created by the non-dom regime.
Freeze on Income Tax and NI Thresholds
The departed conservative government put a freeze on Income Tax thresholds which results over time in larger tax takings (increases in pay with inflation leads to higher tax liabilities with no increase to tax free allowances / basic rate bands etc).
Rachel Reeves confirmed that the current freezes would remain in place, but then we should expect to see increases in these thresholds.
VAT on Private School Fees
Another area which was largely speculated to be changed in the budget was VAT on private school fees.
Currently, private school fees are not within the scope of UK VST. The chancellor confirmed that from January 2025, VAT will be chargeable on school fees increasing costs by 20%
This measure is said to be done to boost the ability to finance public schools which 96% of children in the UK attend.
Autumn budget conclusion
There are clearly a number of significant changes from the budget, most notably the hikes in liabilities for employers who will have to take into account increases to staff wages as well as higher levels of national insurance.
Hikes on CGT payable on the sale of assets, as well as IHT payable on business and agricultural assets which were previously exempt.
It will be interesting to see how the changes to the non-dom rules are drafted in the legislation to try and offer a fair system
Next steps with life after the Autumn budget
These rules will affect different taxpayers in different ways. If you are affected by any of the rules and need any help, our specialist team can help guide you along the way, providing solutions to the problems you may face. Please do get in touch
Why not join us at our next live webinar click here to find out more.
Changes to R&D tax relief were confirmed in the Spring Budget which took place on 15 March 2023. The changes relate to both the SME scheme and the RDEC scheme. These schemes apply to smaller (SME) and larger (RDEC) companies respectively.
Whilst some of the changes will come into force from 1 April 2023; many will follow later on.
We have set out below a summary of all the changes you need to be aware of should you be eligible to make a claim for R&D. This is both in terms of a reminder of those changes previously announced and the most recent changes.
Changes to rates of relief for R&D
For expenditure from 1st April 2023, the additional deduction for SMEs will decrease from 130% to 86%. The SME credit rate will reduce from 14.5% to 10%. There is an exception for loss-making SMEs that are R&D intensive, in respect of which an increase has been confirmed.
A company is R&D intensive if it spends at least 40% of it’s total expenditure on R&D. For these companies the rate of tax credit will be 14.5% compared to 10% which applies to all other companies. This new rate will apply to expenditure incurred on or after 1 April 2023. However, we are yet to see the legislation to support this change.
This therefore means that if your company is R&D intensive, you will need to either:
Claim at the 10% rate and amend the company tax return once legislation is in place, or
Wait to submit claims
The government has published a technical note setting out how this measure works in greater detail.
Draft legislation will be published for technical consultation in Summer 2023.
For expenditure from 1st April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%.
A reminder of other changes announced in last year’s Autumn Budget.
In last year’s Autumn Budget, HMRC announced a number of changes designed to combat R&D fraud. This was also to ensure that there are less errors in R&D claims generally. These are highlighted below.
1) Claims to be submitted digitally
Companies will have to submit their R&D claims online using HMRC’s digital service, which is designed to make it easier for HMRC to review information and conduct risk assessments. A Government gateway or agent services account will be required to log in to and access the service.
2) Claims must include additional information
All claims must include additional information to support claims, such as a breakdown of the types of R&D expenditure – see below.
3) Claims must be supported by a named officer of the company
All claims will need to be supported by a named officer of the company. This is designed to protect against unauthorised claims being taken in the business’s name.
4) Claims must include details of any agents
Each R&D claim will need to include details of any agents associated with the submission. This will include ‘main’ agents and ‘secondary’ agents where more than one agent acts for the client. This could pose a practical problem where more than one agent is involved in the ‘chain’ and we are yet to fully understand how this will work. The point here is that HMRC will be able to more easily spot agents with a track record of submitting spurious claims.
5) Some claimants must submit a pre-notification of their claim
New rules require those claiming R&D relief for the first-time or those who have not claimed in the last three accounting periods to submit a pre-notification of their claim to HMRC online. This gives HMRC the opportunity to take proactive steps to educate companies on R&D processes.
The latest date that a claim notification form must be submitted is 6 months after the end of the period of account that the claim relates to.
If the form is not submitted by this deadline, the claim will not be valid.
To complete the claim notification form companies will need the following details:
the company’s Unique Taxpayer Reference (UTR), this must match the one shown in your Company Tax Return
details of the main (senior) internal R&D contact in the company who is responsible for the R&D claim, for example a company director
the contact details of any agent involved in the R&D claim
the accounting period start and end date for which you’re claiming the tax relief or expenditure credit, this must match the one shown in your Company Tax Return
the period of account start and end date
a summary of the high-level planned activities, for example if software has been developed details of what that software will be used for to show that the project meets the standard definition of R&D — you do not need to include evidence on the form, but you will need to provide further information on the additional information form
6) Expanded categories of qualifying expenditure
Qualifying expenditure is also being reformed to include licence payments for datasets and data analytics and cloud computing costs.
Further information form
Whilst we already knew that additional information in support of R&D claims would be required as this was announced in 2022 it has now been confirmed that this will be required for all claims submitted on or after 1st August 2023 and not after 1st April 2023 as originally expected.
This was perhaps one of the largest changes to emerge and one which will impact thousands of claims.
Companies will need to send HMRC an additional information form before submitting their Corporation Tax Return. If this is not done, HMRC will write to confirm that they have removed the claim for R&D tax relief from the company tax return.
For claims submitted before 1 August 2023 companies can choose to give HMRC more information which may reduce enquiries about claims.
In order to submit this form, further details will be needed, such as but not limited to:
Company details
Contact details of the main R&D contact e.g. company director and any agent involved
Qualifying expenditure details
Project details
Again, we are yet to see further legislation to support this and again this is expected to be published in the Summer of 2023.
Overseas expenditure rules
Planned restrictions to overseas expenditure qualifying for R&D will prevent companies from claiming overseas R&D costs. Quite surprisingly, however, these restrictions have been delayed until 1 April 2024. This will allow the government to consider the interaction between this restriction and the design of a potential merged R&D tax relief which has been consulted on recently.
Time limit for R&D tax relief claims
The legislation sets out a requirement for companies to make their R&D tax relief claims within two years of the end of the period of account on which the return is based unless the period of account is longer than 18 months, in which case the time limit is 42 months from the start of the period.
This has changed from 12 months from the statutory filing date. The change here arises from companies who did not receive a notice to file, either because they failed to register or notify HMRC that they are dormant, who then benefitted by having more time to make a claim.
Merging of the RDEC and SME schemes
The government’s consultation on merging the RDEC and SME schemes closed on 13 March 2023. They are currently considering responses to this, and no decision has yet been made. The option of a merged scheme is still open to implementation from April 2024.
Should it be agreed, the government will publish draft legislation on a merged scheme for technical consultation in Summer 2023, with a summary of responses to the consultation. Any final decision on whether to merge the RDEC and SME schemes will be announced at a future fiscal event.
Other changes
Where the current and new legislation produces any anomalous results, we can be sure to see further changes to the R&D tax relief regime as legislation will be corrected. In that event, ETC Tax will provide further updates.
Next steps
If you have any questions with regards to the changes to the R&D rules, or R&D in general, please do not hesitate to get in touch with our tax experts today. We would be happy to assist with your claim.
