Stamp Duty Land Tax ("SDLT")
There is an increase in the SDLT surcharge on second homes from 3% to 5% with effect from 31 October 2024. This surcharge also applies to those non-UK residents who buy UK property.
Companies who buy dwellings costing more than £500,000 will pay SDLT at 17% instead of 15%.
Inheritance tax
The freeze on inheritance tax thresholds has been extended until 2030. This fixes the nil rate band at £325,000, the residence nil rate band at £175,000 and the taper threshold for the residence nil rate band at £2 million.
From 6 April 2026, agricultural property relief and business property relief on qualifying assets will continue to be available at 100% for the first £1 million of combined agricultural and business property. Relief for assets over £1 million will be reduced to 50% and will be subject to inheritance tax at the standard rate. The £1 million allowance applies to lifetime transfers made in the seven years before death, together with property in the estate at death. The new rules will apply to lifetime transfers made on or after 30 October 2024 if the donor dies on or after 6 April 2026. However, the existing rules will continue to apply to lifetime transfers made prior to 30 October 2024. Any unused allowance will not be transferrable between spouses.
For shares designated as "not listed" on the markets of a recognised stock exchange, such as AIM, the rate of business property relief will reduce from 100% to 50% in all circumstances.
From 6 April 2027, most unused pension funds and death benefits will be included within the value of a person's estate for inheritance tax purposes. Pension scheme administrators will become liable for reporting and paying the inheritance tax due on these assets.
Capital Gains Tax ("CGT")
The main rates of CGT will increase from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers. The rate on disposals of residential property remain unchanged at 18% for basic rate taxpayers and 24% for higher rate taxpayers. These rules will be in effect for disposals made on or after 30 October 2024. In addition, the rate for disposals qualifying for Business Asset Disposal Relief and Investors' Relief will increase from 10% to 14% for disposals made on or after 6 April 2025 and from 14% to 18% for disposals made on or after 6 April 2026.
Furnished Holiday Lettings
The specific tax treatment and reporting requirements have been removed for furnished holiday lets. The result is that income and gains from a furnished holiday let will now form part of the person's UK or overseas property business and will be treated in accordance with all other property income and gains. This change will take effect on or after 6 April 2025 for Income Tax and CGT and from 1 April 2025 for Corporation Tax and for Corporation Tax on chargeable gains. The accessibility of reliefs from taxes on chargeable gains (including roll-over relief and business asset disposal relief), will be removed.
National Insurance Contributions ("NICs")
From 6 April 2025, Employer National Insurance Contributions will be increased from 13.8% to 15% and the threshold at which employers will start paying National Insurance on employee earnings will be lowered from £9,100 per year to £5,000 per year.
Employment Allowance has been increased from £5,000 to £10,500 and the £100,000 threshold has been removed to support small businesses.
Private school fees
Private school fees, including boarding services provided by private schools, will be subject to VAT at the standard rate of 20% from 1 January 2025.
Tax changes for non-UK domiciled individuals
Income tax and CGT
The remittance basis of taxation will be replaced from 6 April 2025 with a new residence-based system.
The new regime will 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 10 consecutive years prior to their arrival.
Inheritance tax
From 6 April 2025, the current domicile-based system of inheritance tax will be replaced with a new residence-based system.
An individual is long-term resident (and within the scope of inheritance tax 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 within the scope for between 3 and 10 years after leaving the UK.
Trusts
Currently, non-UK assets comprised in a settlement are excluded from inheritance tax if the settlor was non-domiciled at the time the assets became comprised in the settlement.
From 6 April 2025 the excluded property status will be based on the residence status of the settlor – if the settlor is within the scope of inheritance tax based on their residence (as set out above), any assets they have settled will be within the scope of inheritance tax.
