In what's being described as the most significant budget for expatriates in living memory, the UK government has announced substantial tax reforms aimed at raising £40 billion in additional revenue. These changes will have far-reaching implications for employers, international assignees, and non-domiciled individuals.
Here's a comprehensive overview of the key changes.
Employer National Insurance Contributions (NICs) Changes
- Employer NICs rate increasing from 13.8% to 15% effective April 2025
- Secondary NIC threshold reduced from £9,100 to £5,000
- Impact example: For an employee earning £100,000, employers will face approximately £2,300 in additional NIC costs annually
Payroll Benefits Reform
- From April 2026, all benefits (except loans and living accommodation) must be processed through payroll
- Government promises new solutions for mobile employees, though details remain pending
Capital Gains Tax Increases
Immediate Changes
- Basic rate taxpayers: Increase from 10% to 18%
- Higher rate taxpayers: Increase from 20% to 24%
- Carried interest rates rising to 32%
Business Asset Disposal Relief (formerly Entrepreneurs Relief)
- Increasing to 14% in April 2025
- Further increase to 18% in April 2026
Non-Dom Taxation Overhaul
The long-anticipated reform of non-domiciled taxation represents a fundamental shift in UK tax policy:
New Residence-Based Regime
- Replacing the current remittance basis system
- Individuals must be non-resident for 10 years to qualify
- New Foreign Income and Gains (FIG) regime limited to 4 years
- Significant reduction from previous 15-year qualification period
Overseas Workday Relief Changes
Mixed News for Expatriates
- Extension of relief period from 3 to 4 years
- Introduction of £300,000 annual cap
- Higher earners may face substantial limitations on relief claims
Impact Assessment
These changes represent the most comprehensive overhaul of UK tax policy affecting international assignees and their employers in recent years. The reforms will require careful consideration in:
- Assignment cost projections
- Tax equalization policies
- Benefits delivery mechanisms
- Long-term assignment planning
Next Steps
Organizations with mobile employees in the UK should:
- Review current assignment policies
- Assess cost implications of increased employer NICs
- Evaluate impact on non-dom employees
- Consider restructuring benefit arrangements ahead of 2026 changes
- Consult with tax advisors on strategic planning
The scope and scale of these changes make it essential for organizations to begin preparation well in advance of implementation dates. Early planning and policy adjustments will be crucial for managing costs and ensuring compliance with the new regime.
Thank you to Vialto Partners Julie Baron and Ben Van Den Dungen for this week's tax update on The View From The Top. You can access the complete update here. Don't forget to register for this weeks show on Project Mobility!