The Chancellor of the Exchequer today delivered her Autumn Statement to Parliament. In the run up to the statement there was much anticipation through the media of substantial tax increases, particularly around Inheritance Tax, Capital Gains Tax and National Insurance.

The headline tax changes were mainly aimed at wealthy individuals as opposed to working class families. Some of these will have a significant effect for Fund managers given the amount they typically earn;

• An increase in the National Insurance paid by employers from the current rate of 13.8% up to 15.0%.

• The level at which employers become liable to pay national insurance on each employee’s salary will reduce from £9,100 per year to £5,000 per year. This change alone will result in an additional employer’s NIC liability of £615 per employee.

• The Employment Allowance is being increased from £5,000 to £10,500 and the current threshold of £100,000 will be removed, therefore, expanding this to all eligible employers who’s National Insurance liability exceeded £100,000 in the prior tax year.

• The main rate of Capital Gains Tax (CGT) paid by individuals will increase from the current rate of 20% up to 24% with effect from 6 April 2025.

• The CGT rate on Carried Interest will increase from the current rate of 28% to 32% with effect from 6 April 2025.

• The Chancellor also announced that further reforms will be introduced to Carried Interest with effect from 6 April 2026, however, these reforms have not yet been decided. From April 2026, Carried Interest is likely to be taxed fully within the Income Tax framework.

• For Inheritance Tax (IHT) purposes, the current Nil Rate Band of £325,000 and Residence Nil Rate Band of £175,000 will be retained. The Residence Nil Rate Band will continue to taper once an estate exceeds £2 million.

• The existing 100% rate of Business Property Relief (BPR) for IHT purposes will be reduced to 50% for the value of all qualifying assets over £1 million. The rate of BPR available will be reduced from 100% to 50% in all circumstances for shares designated as “not listed” on recognised stock exchanges such as AIM.

• With effect from April 2027, the government is also removing the opportunity for individuals to use pensions as a vehicle for inheritance tax planning by bringing unspent pots into the scope of IHT.

• As most people are already aware, VAT at the rate of 20% will apply to private school fees with effect from January 2025.

Reforming the taxation of non-UK domiciled individuals

• From 6 April 2025, Overseas Workday Relief (OWR) will be subject to a financial limit on the amount of relief that can be claimed, this is the lower of £300,000 or 30% of an individual’s total employment income. Currently there is no limit on the amount that can be claimed. The period of OWR will be extended to 4 years compared to the current 3 years.

• As announced in the Spring 2024 budget, the remittance basis of taxation will be replaced with a new regime based on residence with effect from 6 April 2025. The new regime will only provide 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 UK tax resident in any of the previous 10 tax years prior to arrival.

• A new Temporary Repatriation Facility will be available for individuals who have previously claimed the remittance basis. They will be able to designate and remit at a reduced rate foreign income and gains that arose prior to the changes. This includes unattributed foreign income and gains held within trust structures. The Temporary Repatriation Facility will be available for a limited period of 3 tax years, from 2025/26. The Temporary Repatriation Facility rate will be 12% for the first 2 years and 15% in the final tax year of operation.

• From 6 April 2025, Overseas Workday Relief (OWR) will be subject to a financial limit on the amount of relief that can be claimed, this is the lower of £300,000 or 30% of an individual’s total employment income. Currently there is no limit on the amount that can be claimed. The period of OWR will be extended from 3 years to 4 years in order to align with the new 4-year foreign income and gains regime. The removal of the remittance basis means it will no longer be necessary to keep part of their employment income offshore and in an offshore bank account to benefit from relief.

• An individual is a long-term resident (and in scope for IHT on their non-UK assets) when they have been resident in the UK for at least 10 out of the last 20 tax years and then remain in scope for between 3 and 10 years after leaving the UK.

• The protection from tax on foreign income and gains arising within settlor-interested trust structures will no longer be available for non-domiciled and deemed domiciled individuals who do not qualify for the 4-year foreign income and gains regime.

Should you wish to discuss any tax matters please contact Sutha Kanagarajah and Stuart Gartery at Centralis UK Limited.