Overview
Following the UK Government’s 6 March announcement of tax reforms for the current “non-dom” tax regimes, the opposition Labour party has begun to outline how its plans would differ if they win the next UK general election. In a series of interviews on 9 April, Rachel Reeves, the shadow Chancellor of the Exchequer, indicated that Labour would not allow individuals to benefit from inheritance tax protection by establishing excluded property trusts before 6 April 2025. This may mean an earlier cut-off point for when such trusts could be effectively created, or may mean the removal of inheritance tax protections for all such trusts already established. That said, neither of the two main UK parties have set out in detail how they envisage moving inheritance tax from a domicile-based test to a residence-based one. This remains an area of considerable uncertainty.
Regarding income and capital gains tax reforms, Labour have indicated they would abandon the one-year grace period for former remittance basis taxpayers in 2025/26, during which their foreign income would be taxed at half the usual rates. Labour claim this would raise an extra £600 million in tax as a one-off. The fact that Labour’s comments do not go much wider than this could suggest a tacit acceptance of much of the Conservative party’s proposals, and the principle of a four-year arrival period of beneficial tax treatment for new residents. With a UK election on the horizon but not yet given a date, it may be some time before taxpayers and their advisors are given certainty for the UK tax landscape. Whatever the outcome of the election, advice to navigate the inevitable changes will be essential.
