Overview

This Finance Bill makes significant changes to various UK taxes, primarily focusing on income tax, capital gains tax (CGT), corporation tax, and other taxes like VAT, stamp duty, and environmental levies. Key changes include increased tax rates for higher earners and corporations, reforms to the taxation of non-domiciled individuals, and the removal of certain tax reliefs and exemptions.

Description

Income Tax, CGT, and Corporation Tax

The bill sets new income tax rates for 2025-26 (basic rate 20%, higher rate 40%, additional rate 45%), freezes the savings starting rate limit, and adjusts the tax on company cars based on CO2 emissions. CGT rates are increased for most gains (18% and 24%), with changes to business asset disposal relief and investor relief, and the introduction of a higher rate (32%) for carried interest gains. The main corporation tax rate for 2026 is set at 25%.

Oil and Gas Levy

The rate of the energy profits levy on oil and gas companies is increased to 38% from November 2024, and its effect is extended to 2030. Relief is also introduced for investment in decarbonization.

International Tax Matters

The bill incorporates the OECD's Pillar Two global minimum tax rules, including the Undertaxed Profits Rule (UTPR). It also makes changes related to the taxation of internationally mobile employees and offshore receipts from intangible property.

Other Tax Changes

The bill removes VAT exemption for private school fees, introduces a charge on prepaid fees, and increases stamp duty land tax rates for additional dwellings. It also makes adjustments to alcohol and tobacco duties, vehicle excise duty, and various environmental taxes.

Domicile Changes

The bill replaces the domicile test with a long-term residence test (10 out of 20 years) for inheritance tax purposes. It also abolishes the special remittance basis for non-domiciled individuals after 2024-25, introducing a temporary repatriation facility and asset rebasing provisions for those affected.

Government Spending

The bill is expected to increase government revenue through higher tax rates and the removal of certain reliefs and exemptions. Precise figures are not readily available in this Bill text, but the changes suggest a significant increase in tax revenue for the UK government.

Groups Affected

• Higher-rate taxpayers: Will face increased income tax and CGT rates.
• Companies: Will face increased corporation tax rates and the oil and gas levy.
• Non-domiciled individuals: Will lose the remittance basis and may be affected by the temporary repatriation facility and asset rebasing provisions.
• Private schools: Will be subject to VAT on school fees.
• Buyers of additional dwellings: Will pay higher stamp duty land tax.
• Oil and gas companies: Will pay a higher energy profits levy.
• Multinational corporations: Will be subject to the OECD's Pillar Two minimum tax rules.
• Individuals with carried interest: Will face a 32% CGT rate on these gains.
• Film and television producers: Will benefit from increased tax relief for visual effects.

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