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Tax Change ahead of the General Election: what’s changed and what’s postponed?!

Some big tax changes planned in the Budget on 6 March have not been enacted. While some small ones made the cut, before the General Election, the major changes are postponed to party manifestos. Tax proposals are already a big part of the Election campaign but what tax changes in the Budget are actually in force? It all gets very confusing as some tax changes were made in Finance Act 2024 which only had Royal Assent on 22 February, just 3 months ago!

The Finance (No 2) Bill, a mere 26 clauses of non-controversial provisions, has now received Royal Assent, as part of the inelegantly named “wash-up” of bills being cleared, before Parliament was prorogued on 24 May 2024. These included the income tax rates and freezing the starting rate limit for savings for tax year 2024-25 at £5,000. 

Most allowances and thresholds are already frozen long term (to 2028 - the stealth tax changes catching many by increased taxation, including higher rates, with “tax creep”. One reversal of some tax creep in the Budget, the change to the High-Income Child Benefit Charge, was enacted saving many with minor children paying a much higher marginal tax rate through the receipt of child benefit. 

Capital Gains Tax (CGT) on property including Furnished holiday lets (FHLs). The cut, from 28% to 24%, in the higher rate of CGT on residential property, is now enacted. It was announced with the proposed changes to the “quasi trading status” FHLs (planned for April 2025), a policy aiming to increase the availability of longer term let properties for homes, or indeed owner occupation. All by reducing the attractions of “Air BnB type” short-term letting of homes in big tourist areas. The aim was to give taxpayers one year to sell or gift, with a potentially lower CGT rate, or choose to keep their property on less favourable terms. Although the FHL changes have not been made, it is worth anyone with such properties reviewing their tax planning options, anticipating that the changes are likely to follow whoever wins the election.

Inheritance Tax (IHT) changes to Agricultural Property Relief (APR): the change to the geographical scope is made, not just the UK and not the EU or Channel Island or Isle of Man; but not the increasing scope of APR to encourage environmental land management (not due to take effect until 6 April 2025 and more complex to enact). SDLT changes in the Budget were carried through. 

Pension tax changes and the further 2% cut in National Insurance Contributions (NICs) (the main rate reduced to 8% from 6 April 2024, previously 10% from January and before that 12%) have already been enacted.

A proposed new ISA allowance, to encourage investment in the UK, will have to wait as not time to enact. As will the biggest, most controversial change announced in March:

Resident Non-doms (RNDs) the major change to the taxation of RNDs, for Income Tax, CGT and IHT, is now for the manifestos, as was always likely as the changes are so huge. There will need to be consultation on the details, and draft legislation, whichever party wins the Election. The whole tax world for non-doms will change enormously, in either event, but Labour have indicated some changes from the Conservative plans announced in the March Budget. The plan was to introduce from 6 April 2025, giving 9 months after the Election to get the details sorted. 

Anyone likely to be affected by these changes is well advised to take advice now, or ASAP, even before 4 July. The great scope of the changes is such that it is not wise to wait until all the details are known, as that may be too late to both take advice and act upon it. If advice can be taken, then the relevant documents could always be implemented ahead of 6 April 2025. As Labour’s plans are tougher than the Conservatives, some may choose to follow those who are leaving the UK now, not waiting for the details or implementation!