Key Tax Considerations for 2024 and Beyond

As we look toward the Labour government’s approach to taxation, it has been communicated that changes could be on the horizon for those with significant assets. Their focus on addressing wealth inequalities could mean higher taxes for clients with large property portfolios, pensions, or investment income.

We will be closely watching Labour’s proposal to shift from a domicile-based inheritance tax (IHT) system to a residence-based approach. While this could present planning opportunities for some—especially for those who have been non-UK residents for several years with no plans to return—it may also create challenges for others that will require careful consideration and advice. From April 2025, foreign assets held in trusts by non-UK domiciled individuals may no longer qualify as “excluded property.” This could lead to significant IHT liabilities, with up to 40% tax payable on death and 6% on the 10-year anniversaries of the trust. Understanding the impact of these changes is critical for effective planning.

Additionally, property taxation may be reformed, particularly for high-value homes. Changes to Capital Gains Tax (CGT), especially on second properties or buy-to-let investments, are being speculated. Labour might look at increasing CGT rates or reducing the CGT exemption threshold, which could affect many property investors. There’s even talk of a potential mansion tax on high-value properties, targeting wealthier homeowners.

For pensions, Labour may revisit pension tax relief, particularly for higher earners. Speculation includes reducing the annual allowance or even reversing the recent abolition of the Lifetime Allowance (LTA). While these reforms remain uncertain, they highlight the government’s focus on reducing tax advantages for wealthier savers.

With the LTA abolished from April 2024, a new Overseas Transfer Allowance (OTA) has been introduced. This limits the amount that can be transferred from UK pensions to QROPS without a tax charge. The OTA is capped at £1,073,100, and any excess will be subject to a 25% transfer charge.

We’re also keeping an eye on broader economic events, such as central banks cutting interest rates and the US elections, which could impact markets in the coming months.