Chancellor’s Economic Statement announces first Budget date

Just before the summer parliamentary recess commenced at the end of July, new Chancellor of the Exchequer Rachel Reeves announced that the Labour Government’s first Budget will take place on Wednesday 30 October. The Chancellor also announced next steps and published draft legislation on some “priority tax commitments” ahead of the full announcements which will take place on Budget Day. The Finance Bill 2024-25 draft legislation and technical tax documents were also published and several new tax policy announcements were made, including the expected removal of the VAT exemption for private school fees. A full Ministerial Written Statement is also available and it is confirmed that there will be no increases to income tax, employee national insurance contributions, or VAT. 

The measures announced in July included the following:

• 2024: Non-UK domiciled individuals - policy summary - this confirms that the four-year foreign income and gains regime announced by the previous government at the Spring Budget will take effect for all foreign income and gains arising from 6 April 2025. However, the proposal to provide a 50 percent reduction in foreign income subject to tax for individuals who lose access to the remittance basis in the first year of the new regime will not be introduced. A temporary repatriation facility will be available for individuals who have been taxed on the remittance basis, and a form of overseas workday relief will be retained. Further details will be provided at the Budget.
• The current domicile-based inheritance tax (IHT) system will proceed, again as announced by the previous government, to be replaced with a new residence-based system from 6 April 2025. This will be based on whether or not a person has been resident in the UK for 10 years prior to the tax year in which the chargeable event (including death) arises, with a 10 year “tail provision” to be introduced after leaving the UK.
• The new government intends to end the use of excluded property trusts to keep assets out of the scope of UK IHT. Confirmation of these new rules, including transitional arrangements, will be published at the Autumn Budget, after external engagement. A formal consultation will not be taking place.
• The furnished holiday lettings tax regime is being abolished as planned from April 2025 with an anti-forestalling rule in place from 6 March 2024 to prevent the use of unconditional contracts to obtain capital gains tax relief under the current rules. Details of a number of transitional rules necessary as a result of this change have also been published.

   

  Announcements were also made in the following niche areas:

   

• Pillar 2: transitional country-by-country reporting safe harbour anti-arbitrage rule,
• Tax treatment of carried interest - Call for Evidence, and
• Changes to the Energy (Oil and Gas) Profits Levy.

Tax non-compliance

The government also set out its commitment to tackling tax non-compliance in the publication “Fixing the foundations: public spending audit 2024-25” with the new Exchequer Secretary to the Treasury stating that work has begun on recruiting 5,000 more HMRC staff specifically for this purpose. The government also stated its commitment to investing in HMRC’s technology infrastructure. Further updates will be provided on this at the Budget.

End of private school fees VAT exemption

The ending of the VAT exemption and the introduction of 20 percent VAT on education and boarding services provided for a charge by private schools across the UK will commence from 1 January 2025. This will also apply to pre-payments of fees for terms starting on or after 1 January 2025 made on or after 29 July 2024. However, this change will not apply where pupils with the most acute special educational needs can only have those needs met in private schools. 

Schools cannot register yet for this charge on education and boarding. In due course, HMRC will provide schools with details on how and where to register.