Last week, Rachel Reeves, the Chancellor of the Exchequer, delivered Labour’s first budget since 2010. Here’s a roundup of the main points.
UK Autumn Budget highlights
The UK’s Autumn Budget for 2024 was groundbreaking as the first ever to be delivered by a female chancellor. It was also Labour’s first budget since 2010 and hotly anticipated as a result.
Overall, the budget announced increased spending, taxation, and borrowing.
Businesses will bear the brunt of Reeves’ ambitious investment programme with a rise in employer National Insurance contributions. However, there are a number of announcements which could affect UK expatriates living in Asia and these are highlighted below.
- National Insurance employer contributions
Class 1 employer national insurance contributions will rise from 6th April 2025. The new rate will be 15.0%, up from 13.8%. In addition, the secondary threshold at which employer NICs are payable will be reduced from £9,100 to £5,000. This hefty increase puts a heavy burden on the business sector in order to raise tax revenue and will hit workers indirectly.
Class 2 voluntary contributions that many expatriates pay in order to qualify for a full UK state pension will rise from £3.45 to £3.50 per week. The window to backpay these as far back as 2006 is closing soon. This is still a cost-effective way to boost retirement income for many UK expats. If you are considering this option, don’t delay, contact your financial adviser for advice on whether it is worthwhile or not.
- Capital gains tax
Capital gains tax rates on profits from shares will increase with immediate effect. Non and basic rate taxpayers will now pay 18% (up from 10%) CGT while higher and additional rate taxpayers will pay 24% (up from 20%). This will come as a blow to investors although landlords have been spared as CGT rates on profits from selling additional property remain unchanged.
- Inheritance tax
The freeze on the IHT threshold of £325,000 has been extended until 2030. This will increase the number of estates liable for IHT and raise the IHT bill for those already subject to IHT due to property appreciation.
In addition, from 6th April 2027 unspent pension funds and pension death funds will be subject to IHT.
In a move condemned by farmers, business and agricultural reliefs on IHT will be capped at a combined total of £1million, effective from April 2026. Over £1million, the rate of tax relief will be 50%. AIM shares do not qualify for the cap and only qualify for 50% relief.
Expatriates concerned about this tax are invited to contact us for financial planning advice on minimising their IHT burden.
- Stamp Duty Land Tax
Stamp Duty Land Tax (SDLT) applies to property purchases, including second homes and buy-to-let properties. The additional rate that is applied to second homes and buy-to-let homes is rising from 3% to 5%.
The stamp duty threshold will also be lowered from £250,000 to £125,000 in March 2025, in a reversal of a tax cut introduced by the Tories. In addition, the threshold for first-time buyers will fall from £425,000 to £300,000.
- VAT on private schools
From 1st January 2025, the VAT exemption on private school fees and boarding services will be lifted and VAT will be charged at 20%. This could hit expatriates with children at private school in the UK hard. If you need help with financial planning in the light of this change, please speak to your financial adviser.
- ISAs
The limits on deposits into ISAs, Junior ISAs, and Lifetime ISAs will be frozen until April 2030. This is disappointing news for investors as with current inflation rates, it constitutes a cut in real terms.
Expatriates may keep ISAs open while resident in the UK but cannot open or contribute to them while living abroad. The savings limit for ISAs is £20,000, for Lifetime ISAs £4,000 and for Junior ISAs £9,000.
- Non-dom status
As expected the non-UK tax status will be abolished from April 2025. It will be replaced with a residence-based scheme. Newcomers to the UK can opt in to the new regime to be exempted from UK tax on foreign income and gains arising in the first four years of tax residence.
This change will impact high-net-worth individuals who previously benefited from tax exemptions on foreign income.
There are implications for returning British expatriates too, as all income from foreign sources could now be subject to UK tax. If you’re planning to return to the UK in the near future, it’s essential to consider your financial situation if you have overseas investments, properties or business interests.
This is also pertinent if you have a non-dom spouse as it is no longer possible to protect foreign income from UK tax exposure and you may need to reassess how investments are structured.
With the shift towards a residency-based taxation system, we advise all British expats to carefully review their residency status and tax obligations. Residency status can be clarified using the statutory residence test.
Clients concerned about how changes to non-dom status might affect them and their families now or in the future should seek financial advice.
Financial planning for expatriates in Asia post-Autumn Budget 2024
Expatriates in Asia need to ensure that they understand the implications of the budgetary reforms announced in the Autumn Budget in order to adjust their financial planning accordingly.
If you are concerned about how the budget changes could affect your long-term financial planning, please get in touch for a review with one of our professional and knowledgeable financial advisers across Asia.
A leading provider of expat financial services and wealth management services across Asia.
