Trick or Treat? The first labour Budget for 14 years

The first part of the above is actually from the last Labour Budget in 2010.  Time may have moved on but not so sure that the Labour Party has.

Most of the scaremongering of the past few weeks has turned into reality.  Despite all the spin Britain seems to have entered another phase of tax (£40bn) and spend.

We expect the headlines tomorrow to be around potholes, bus fares, and fuel duty but these are domestic issues.  However, what is the position for the islands ?

If we look at what has been announced, we are struggling to see how the below headline announcements will drive domestic UK economic growth. In fact, these measures could persuade businesses, entrepreneurs and wealthy individuals to leave the UK, creating opportunities in the islands to benefit from additional investment:

National Insurance for employers – up

• Increasing by 1.2% to 15% - threshold reduced to £5k

Stamp Duty Land Tax on second homes – up

• Increasing by 2% to 5%

Air Passenger Duty – up

• All categories increased but 50% increase on private jets

Capital gains tax – up

• 10% increases to 18%
• 20% increases to 24%

Carried interest taxation – up

• 28% increases to 32% and additional changes from 2026

BPR / APR – restricted

• Tax free £1m – reduced rate 20% thereafter

AIM shares – taxed

• IHT at 20%

IHT on inherited pensions – introduced

• Now within the estate

Non – domiciled regime – abolished

• 4-year FIG rules to be implemented broadly inline with published proposals and the temporary repatriation facility (“TRF”) survived to make the final policy paper.  
• The interaction of the TRF on trusts looks complicated... one might go as far to say a horror show!  
• IHT treatment of trusts will change significantly from 6 April 2025 with the introduction of the new residency basis of IHT. 
• First the treat - importantly there has been some relaxation in respect of existing structures whereby gift with reservation of benefit charges will not apply to existing excluded property trusts, with some exceptions. 
• Then the trick - going forward all trusts with a long-term resident settlor will be subject to 10 year and exit charges and possible exit charges where the settlor ceases to be long-term resident!

IHT allowances – frozen

• No increase to the basic allowance of £325k

Additional interest on unpaid tax

• Up by 1.5%

But on the plus side a pint of draught beer will be reduced by 1p !

Conclusion

The domicile changes were well advertised, and we expect significant work to have to be undertaken between now and next April.  

The devil, as always, will be in the detail and we will provide additional commentary over the next few days and the above is only our initial views on the publications made available today.

If the islands are proactive then we suspect that they will benefit from this year’s UK Budget as wealth creators seem to be no longer welcome in the UK.  However, we fear that the islands will fail to grasp this opportunity and like most things recently fail to make a decisive decision and instead watch the opportunities disappear.

The islands need to demonstrate that they are open to new business and families. New business should be welcomed with open arms but with certain conditions attached. Perhaps private health care, private pensions and minimum tax liabilities - all linked to business licences as a starter?

As Halloween arrives the song for UK business seems to be:

1 – 2 Rachel’s coming for you

3 – 4 where’s the exit door

5 – 6 government tricks

7 – 8 additional costs will be great

9 - 10 here we go again ….