Rishi Sunak stood in front of the House of Commons with what appeared to be a relatively upbeat message. Whether the rhetoric becomes fact, only history will tell us, but at least there were no major surprises in the Autumn Budget and Spending Review 2021.
No news is good news for non-doms and investors
The much-feared increase to the rate of Capital Gains Tax (CGT) is still the elephant in the room with this Chancellor. No news on that yet, which leaves investors and private equity executives breathing a huge sigh of relief once more. There are no changes to either the Inheritance Tax regime for UK nationals, or to the remittance basis for foreign domiciliaries (“non-doms”). The only major change on the international front is the consultation on introducing a re-domiciliation regime for corporates, which allows a company to move its country of incorporation from overseas to the UK. This will bring the UK into line with around 50 other jurisdictions that already have such options.
The main changes announced today surround the rates of Universal Credit, National Insurance, Business Rates, Air Passenger Duty and Alcohol Duties (which we do not plan to cover in this note). However, other changes that may impact you are:
Increases to Income Tax rates on dividend income
From 6 April 2022, the rate of income tax on dividend income will increase by 1.25% for all taxpayers. This means that the ordinary rate, upper rate and additional rate of tax on dividend income will increase from 7.5%, 32.5% and 38.1% to 8.75%, 33.75% and 39.35% respectively. The dividend rate applicable to trusts will also increase from 38.1% to 39.35%.
The main reason for the increase is to prevent individuals from setting up personal service companies to remunerate themselves by way of dividends, rather than paying the increased rates of Class 1 and 4 National Insurance Contributions of 1.25% as an employed or self-employed individual, which will also increase from 6 April 2022.
Extension to reporting and payment of CGT on UK real estate disposals
From today, individuals will have an additional 30 days to report their disposals of UK real estate and pay any CGT due. This measure will apply to both UK residents and non-residents and increases the reporting time from 30 to 60 days from the date of completion. This measure provides a welcome and more realistic timeframe for individuals to organise themselves (and for HMRC systems to deal with the registration) following the sale of their UK land or property.
As briefly mentioned above, the UK is consulting on the introduction of a corporate re-domiciliation regime, which will allow offshore and overseas companies to change their country of registration to the UK without the need to undertake potentially complex and costly share restructuring. This will allow more company headquarters to be established in the UK but will also mean that many of the offshore companies that can be costly to administer, and now have little benefit in being offshore, can be redomiciled to the UK without the need to obtain clearance from HMRC on share restructuring.
This final measure will significantly benefit those property holding structures in the Channel Islands which no longer need to be offshore, allowing the shareholders to move the company into the UK and potentially reduce their administration costs.
Immigration Visa reform
As announced in the March Budget 2021, from Spring 2022 the UK will offer New Scale-Up, High Potential Individual and Global Mobility Visas to attract high-skilled migration and support inward investment. Click here for our note on the subject, and the other announcements made in March.
As always, if you have any questions on how the budget may affect you or your clients, please do get in touch:-