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Tax changes to progress to law in the new year

Newsletter issue – January 2025

The 2024-25 Finance Bill is on course to complete in the new year. This will enact the many tax measures announced in the Autumn Budget into law.

The Government has published an official document entitled 'Overview of tax legislation and rates', detailing the main changes set to take effect following the Chancellor's announcements on 30 October. Within the core parts of the paper is the setting of rates and thresholds for Income Tax, Corporation Tax, Inheritance Tax and Capital Gains Tax - the latter two of which were among the biggest reforms in the Budget. Reforms to tax rules for alternative finance and carried interest, also feature.

The bill has reached the committee stage in Parliament and is on track to become legislation in the coming weeks.

One of the areas of tax that received very little attention at the Budget but is contained within the draft legislation is the reduction of tax-free overseas transfers of tax-relieved UK pensions.

According to Government papers, this will 'remove the exclusion from the Overseas Transfer Charge of transfers to Qualifying Recognised Overseas Pension Schemes (QROPS) established in the European Economic Area and Gibraltar, where the member is resident in the UK or an EEA state'.

The consequence of this change is that pension transfers from 'tax relieved UK pensions to QROPS in the EEA and Gibraltar will now be subject to a 25% charge, unless another exclusion applies'.

The measure will apply, backdated in effect, from 30 October 2024.

One of the key exceptions to the bill in terms of how it affects people across the whole of the UK relates to taxpayers in Scotland and Wales. For Scottish taxpayers things are a bit different, with income tax rates and limits set by the Scottish Parliament, rather than by the UK Government at Westminster. And it's also worth noting that UK rates are reduced by 10 pence in every £1 for Welsh taxpayers. Income Tax for non-savings and non-dividend income for people in Wales is set by the Welsh Parliament.