Now that we are in a new UK and US tax year it’s wise to recap the big changes and things to be thoughtful from both a UK and US perspective.
United Kingdom and HMRC
The recent focal point of discussion over the last few weeks in the UK has been around the non-dom changes. These changes have yet to be formalized and still await conclusive approval. The changes which are live for this year include:
- National Insurance Contribution (NIC) Rate Cuts: From April 2024, NIC rates will decrease for both employees and the self-employed. Additionally, self-employed individuals won’t be required to pay Class 2 NICs.
- Dividend Tax Allowance Cut: The tax-free allowance for dividend income will decrease from £1,000 to £500. This makes it important for limited company owners to review their remuneration strategies.
- VAT Registration Threshold Increase: The VAT registration threshold will rise from £85,000 to £90,000. This will hopefully reduce the administrative burdens and take many businesses out of the net of VAT.
- High-Income Child Benefit Charge Threshold Increase: The threshold for this charge will rise to £60,000 benefiting employed and self-employed parents.
- Capital Gains Tax Changes: The CGT rate on residential property will decrease to 24%, but the annual exempt amount will reduce to £3,000.
United States and the Internal Revenue Service (IRS)
On the US front there has been very little change, with the customary trend of rate increases aligned with inflation prevailing as usual. Therefore:
- Annual Gift Allowance – The amount an individual can gift to any one person has risen to $18,000. This is per person and available annually, so if you are thinking of making gifts this amount should be used.
- NRA Spouse – A US citizen can gift their Non-Resident alien spouse up to $185,000 annually. This can be very useful in reducing the estate tax burden for a mixed marriage couple.
- Lifetime Gift Allowance – This has increased from $12.92m to $13.61m. A US couple get a total exemption of $27.22m, this may sound very high but it is due to sunset at the end of 2025 so there may be an opportunity to use this prior to then.
