Overview

The Finance Bill 2025 makes significant changes to UK tax laws, primarily focusing on income tax, capital gains tax, corporation tax, and various other taxes. It introduces new rules for individuals becoming UK residents, ends the special treatment of non-domiciled individuals, and modifies several tax rates and reliefs.

Description

The bill is structured into four parts. Part 1 covers income tax, capital gains tax (CGT), and corporation tax. Key changes include increased rates for income tax, CGT (excluding residential property), and corporation tax. The oil and gas profits levy is also increased. New provisions are made for a Pillar Two global minimum corporate tax system. The bill simplifies taxes on international matters and provides various reliefs for businesses, such as those investing in zero-emission vehicles. It also includes measures relating to employee-ownership trusts.

Part 2 replaces the special tax rules relating to domicile. It introduces new relief for qualifying new UK residents on foreign income and gains, ending the remittance basis for tax years after 2024-25. It establishes a temporary repatriation facility for those previously subject to the remittance basis and allows for the rebasing of assets. Further amendments concern trusts and the treatment of foreign income.

Part 3 covers other taxes, including changes to Value Added Tax (VAT), by removing exemptions for private school fees and implementing a new charge on prepaid fees. Stamp duty land tax rates are also increased, both for transactions before and after April 1st, 2025. This part also includes adjustments to various excise duties (alcohol, tobacco, vehicles) and environmental taxes (climate change levy, landfill tax, aggregates levy, plastic packaging tax) as well as the soft drinks industry levy.

Part 4 addresses miscellaneous provisions, including measures to counter tax avoidance related to limited liability partnerships and loans to participators in a close company, a crypto-asset reporting framework, and preparations for new taxes on vaping products and a carbon border adjustment mechanism. Finally, it clarifies interpretations and provides a short title for the bill.

Government Spending

The bill is expected to increase government revenue through higher tax rates and the removal of certain tax exemptions. Precise figures are not provided within the bill text. The increased revenue will be used to help fund public expenditure.

Groups Affected

• High-income earners: Will face increased income tax and CGT rates.
• Non-domiciled individuals: Will no longer benefit from the remittance basis, potentially leading to higher tax liabilities.
• Businesses: Will be affected by changes in corporation tax and various business reliefs. Oil and gas companies will be impacted by the increased levy.
• Private schools: Will lose VAT exemptions on school fees.
• Property buyers: Will face increased stamp duty land tax rates.
• Consumers: Will face increased prices on certain goods and services due to changes in excise duties and environmental taxes.
• Multinational corporations: Will be subject to the new Pillar Two global minimum corporate tax rules.
• Pension schemes and individuals with overseas pension schemes: Changes to the rules governing these schemes and the overseas transfer charge.
• Individuals with foreign income and assets: New rules will impact the tax treatment of such income and assets.

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