The Main Changes in the 2024-25 CII R03 Study Text

Here, we take a look at the main changes that you’ll come across in the 2024/25 version of the CII’s R03 study text. As there have been no significant syllabus changes, the majority of the amends stem from the Autumn Statement 2023, the Spring Budget 2024, and the turning of the tax year.

This article is correct as at 8 July 2024 and is relevant to the 2024/25 examinable tax year.

R03, Chapter 1

Dividend Allowance

The dividend allowance has halved to £500 from 6 April 2024.

Married Couple’s Allowance

The 2024/25 figures for the married couple’s allowance have been updated. The allowance is now £11,080. This is reduced by £1 for every £2 of income over the threshold of £37,000, to a floor of £4,280.

High Income Child Benefit Charge

The income threshold for the high income child benefit charge rises from £50,000 to £60,000. Rather than the tapered charge applying between £50,000 and £60,000, it will apply between £60,000 and £80,000. Once income exceeds £60,000, there will be a 1% charge for every £200 over, with the charge reaching 100% at £80,000.

Income Tax and Trusts

It was announced in the Spring budget that the standard rate band would be abolished from 2024/25.

Trusts with income of £500 or less will have no reporting requirement and will pay no tax.

Where a discretionary trust has income of more than £500, trust rates will apply to ALL of the income (i.e. 39.35% for dividend income, 45% for all other income); and

Where a settlor has created more than one discretionary trust, the £500 is divided by the number of existing trusts, subject to a £100 minimum floor. 

R03, Chapter 2

National Insurance Contributions

Employee class 1 main rate falls from 10% to 8%.

The content on Married Women’s NICs has been removed.

Self-employed class 4 main rate falls from 9% to 6%.

In addition, no self-employed person will be required to pay Class 2 NICs, although if they earn under the small profits threshold, they can be paid voluntarily by those who wish to build up entitlement to the New State Pension.

R03, Chapter 3

Capital Gains Tax (CGT)

There is a reduction in the higher rate of CGT for non-exempt residential properties; from 28% to 24%. There is no change to the 18% basic rate. 

The CGT annual exempt amount (individuals and legal personal representatives (LPRs)) has halved to £3,000. 

R03, Chapter 5

Residence and Domicile

From 6 April 2025, a residence-based regime will be introduced, effectively replacing the current remittance regime:

• There will be a four-year relief for new arrivals into the UK, providing they have not been a UK resident for tax purposes in the last ten years. During this period, overseas income and gains will be exempt from UK tax, even if they are brought into the UK.
• Anyone who has been a UK resident for tax purposes for more than four years will then start to pay UK tax on their worldwide income and gains. Their domicile status will not be relevant.

Transitional arrangements for those already eligible for or claiming the remittance basis will be put in place.

IHT is in scope, with the intention that individuals will be subject to UK IHT on their UK assets only for their first 10 years of UK residency, rather than the current 15 out of 20 years for deemed domicile. Thereafter, IHT will be chargeable on their worldwide assets. Non-UK assets held by trusts settled after 6 April 2025 will be exempt if they are settled in the first 10 years of UK residency. 

R03, Chapter 8

Value Added Tax (VAT)

The VAT registration threshold increases to £90,000 (deregistration at £88,000) from 1 April 2024.  

R03, Chapter 9

Furnished Holiday Lettings (FHL)

This regime will be abolished from 6 April 2025, meaning FHL landlords will no longer benefit from being able to pay pension contributions on the basis of their rental income, CGT rollover, holdover or business asset disposal relief. 

R03, Chapter 10

Pensions

Following the abolition of the lifetime allowance and lifetime allowance tax charge, we have two new pension allowances for 2024/25:

• The lump sum allowance (LSA): £268,275 (a quarter of the former lifetime allowance of £1,073,100) – the maximum a pension member can take as a tax-free lump sum from their accumulated pension funds during their lifetime unless they have a protected right to take a higher amount.
• The lump sum and death benefit allowance (LSDBA): £1,073,100 – the maximum that can be taken tax-free from an individual’s accumulated pension funds during lifetime and on death, unless they have a protected right to a higher amount.
• Where either of these allowances is exceeded, the excess is taxed at the recipient’s marginal rate of income tax.

ISAs

Quite a few ISA changes are upon us, including:

• The minimum age for a Cash ISA has been raised to 18 (from 16).
• Rather than only being able to invest in one of each type of ISA each tax year, you can now open and pay into multiple cash and stocks and shares ISAs.
• Partial transfers are now permitted, regardless of when the ISA investment was made
• Innovative Finance ISAs can now hold long-term asset funds, open-ended property funds with extended notice periods and cash.

The UK ISA will give savers an additional £5,000 ISA allowance to invest in UK-focused assets when it is launched in due course. 

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