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Hammond’s NIC U-Turn

Perhaps this is not an auspicious start for the new Chancellor in that he has now abandoned one of the measures he announced only last week in his first Spring Budget.


No doubt the mounting pressure from his colleagues, and a closer scrutiny of the manifesto pledges made by the Conservatives, has led him to the conclusion that it would be inappropriate for him to proceed with the proposed increases in National Insurance for the self-employed which were timetabled to come into force on 6 April 2018. Whilst this may be good news for many, one is left wondering where he will now get the £2 billion from which he was expecting to raise with this measure by 2022.


My fear is that he may look to other perceived “inequalities” which exist within the UK tax legislation.


If the difference in the rates of National Insurance paid by employed individuals and a self-employed individual was viewed as an inequality, perhaps he will now turn his eye to the OMB sector. Here dividend planning is an integral part of remuneration strategies for all such businesses.


Notwithstanding the planned reduction in the dividend allowance from £5,000 to £2,000 planned for 6 April 2018, might the Chancellor now look to take further measures to reduce the benefits which can arise with appropriate share and dividend planning for OMBs?  My fear is that he will and that we will have to wait until the Autumn Budget to find out more.


This may therefore be an appropriate time for business owners to take a close look at their profit extraction strategies.


For help or advice on this or any other tax matter  for you or your business, contact us at Friend Partnership Limited on 0121 633 2000 or click here to send an email.


Click here to read our Budget comment from 8 March 2017.


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The UK's tax system for individuals classed as "not UK domiciled" (often called "non-doms") is undergoing a significant overhaul. This system has traditionally offered tax advantages for foreign income and gains, but those benefits are coming to an end. Non-domiciled individuals are generally those who haven't established strong ties to the UK in terms of residence or family connections. Previously, they enjoyed a tax perk known as the "remittance basis of taxation." This allowed them to avoid paying UK income tax on foreign income and capital gains, as long as the money remained outside the UK. However, these advantages have been gradually restricted in recent years. The new reforms, announced by the Chancellor of the Exchequer – Jeremy Hunt, represent a change to the existing non-dom tax system. The New System - What Does it Mean Non-Doms in the Future? Starting April 6th, 2025, a new system will be in effect. Here's what it entails for non-domiciled individuals who become UK resident after that date: Temporary Tax Exemption: If you haven't been a UK resident in the past 10 years and become one after the reform, you'll benefit from a temporary tax exemption. This means your foreign income and gains will be exempt from UK income tax for the first four years of your UK residency. Standard Taxation After Four Years: After the initial four-year grace period, your foreign income and gains will be taxed on the same basis as other UK residents. To avoid double taxation, relief will be available against UK tax under Double Tax treaties or the Unilateral system for any foreign tax already paid. What about Existing Non-Doms? The government acknowledges the complexities of transition for current non-dom who are UK residents. Transitional rules are being considered to ease the shift. These may include: Reduced Tax Rate for Bringing Foreign Income to UK: Existing non-doms might be offered an opportunity to bring previously untaxed foreign income and gains back to the UK at a reduced tax rate. Rebasing Foreign Assets for Capital Gains: There's also a possibility of "rebasing" the value of non-domiciled individuals' foreign assets for capital gains tax purposes. This could mean using the asset value in 2019 as a baseline, potentially reducing their future capital gains tax liability. Uncertainties and Taking Action The details of the new system and the transitional rules are still under development. The full picture will become clearer when the government publishes further consultations later in the year. Given the complexities involved, it's crucial for individuals who might be affected by these reforms to seek professional tax advice. Understanding the opportunities and potential pitfalls of the new system can help you make informed decisions about your financial future. While the non-dom tax reform simplifies matters to a certain extent, it introduces new considerations for individuals with international finances. Staying informed and seeking professional guidance will be key to navigating these changes effectively.

Friend Partnership is a forward-thinking firm of Chartered Accountants, Business Advisers, Corporate Finance and Tax Specialists, based In The UK

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