The UK Autumn Budget 2024… what this could mean for the Channel Islands

The much-anticipated delivery of this Labour government’s first budget should provide us all with more certainty following on from a litany of predictions and speculations that are currently swirling around.   

Both the Prime Minister and Chancellor have warned that the budget will be ‘difficult’ and ‘tough,’ and much is being written about what measures will be unveiled to address the £22bn “black hole” in public finances which the current government suggest they have inherited from previous Conservative administrations.  More recent reports hint at the current government looking to raise £40bn between a combination of tax rises, and spending cuts.

The uncertainty is causing a number of individuals to vote with their feet and leave the UK, and we have seen a significant upturn in interest for individuals to move to Jersey and Guernsey and have been actively supporting a number of such individuals to undertake that relocation.

What changes might we expect?

We will not know until budget day what changes in tax policy are made.

We are expecting additional clarity in relation to what we know so far, that there will be changes to the non-UK domiciled tax regime and also inheritance tax.

UK resident non-domiciled individuals

Since the last Spring Budget, it has been established that the abolition of the non-UK domiciled individuals tax regime in its current guise looks certain to proceed¹.  We await with anticipation the details as to what the ‘replacement’ system will look like.  Any current non-UK domiciled individuals, and any individuals looking to move to or from the UK, should be reviewing their position and looking at any means by which to mitigate against these changes.

Inheritance Taxes (“IHT”)

Much is being written around IHT and whether the Chancellor may take the opportunity to give a fairly significant overhaul to what is often referred to as the most hated of taxes. This could see changes made to Business Property Relief and Family Gifts, a relief which can be of significant value to business owners and can facilitate efficient successions of family businesses through generations.  

Trustees and advisors, together with their clients, await with anticipation (and more than a hint of trepidation) what is announced in relation to IHT protections afforded to certain offshore trust structures¹.  To what extent will there be ‘grandfathering’ of existing trusts, and what date would that be effective from?  Or could the worst-case scenario unfold, whereby all offshore trusts have IHT protection removed?  Further, any removal of the current IHT exemption that exists for non-residential property which is held through certain offshore structures would certainly be a major shake up that could have a significant impact locally.

Trustees ought to be ensuring they spend what time is left ensuring that the relevant income and stockpiled gains calculations are fully up to date so that informed choices can be made quickly.

^[1] This is a topic that we have written about previously:
UK Election opinion | Grant Thornton Limited

Other changes?

Some potential other changes that we could see announced may include:

•  Increase in Capital Gains Tax (“CGT”) 

Current rates of CGT are fairly low in UK terms, with the highest band at 24%, so an increase could well be on the cards.  It has been speculated that CGT could potentially rise to be in line with rates of UK income tax (i.e. up to 45%.)   

CGT could also be an area where certain reliefs could be adjusted, or withdrawn, for example the Principal Private Residence relief which can apply when an individual sells their only or main residence, or perhaps we may see higher rates for sales of homes which are not an individual’s main residence.   We also hope to gain more certainty on what changes are announced in regard to the existing carried interest tax rules.

•  Increase in National Insurance

While the government previously ruled out increasing VAT, Income Tax or National Insurance, the Chancellor  has given a clear signal that there may well be an increase in National Insurance paid by employers, but not for the employees. This is in line with Labour's election pledge not to increase National Insurance on "working people".  

• Pension reform

We may see some changes to UK pension rules, potentially applying limits to income tax relief on the making of contributions and/or looking at reducing the tax free lump sum which can be drawn upon retirement.  Such changes are however seen as a rather political hot potato which the Chancellor may deem too challenging to go for currently.

Voting With Their Feet?

It is clear that all of the uncertainty, twinned with the messages that have been coming out from the current government has led a number of individuals to vote with their feet and depart the UK altogether. Some are reassessing where they hold their wealth and business interests and determining that the UK is no longer an attractive location. 

We are seeing this first hand from the number of enquiries we have for individuals and their families to move to the Islands, and cases of us actively supporting individuals to make that relocation. We expect to see this trend increase following the budget, though this will in part depend on what is announced and when it will be implemented. 

For those that do remain in the UK, and in particular those current non-UK domiciled individuals who are likely to be affected by the changes, they should be assessing and evaluating their intentions and financial position in the wake of the budget so that they are able to make timely and informed decisions. 

How Grant Thornton can help

We will be following the budget announcements closely and shall be actively supporting trustees and private clients to assess the implications of the announcements and help them navigate the changes.

The direction of travel of UK policy is leading a number of individuals, their families, and their businesses to rethink their existing situation within the UK given the political volitivity. For any such individuals, the Channel Islands are an attractive choice.

Grant Thornton Channel Islands has extensive experience in helping and supporting individuals make a move to the Islands, and providing advice in relation to their personal and business circumstances. Planning in advance of the move and gaining advice as early as possible is always recommended in order to smooth the transition and allow any tax planning to be adequately considered.

No matter what stage such individuals are at in their thinking, we are ready and at hand to discuss and provide our considerable expertise.