The Main Changes in the 2024-25 CII R06 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 R06 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 14 July 2024 and is relevant to the 2024/25 examinable tax year.

Advice Guidance Boundary Review

This review presents three main proposals: clarifying the advice-guidance boundary, introducing a targeted support regime, and implementing a simplified advice regime. These initiatives are designed to help consumers make better-informed decisions about their investments and pensions by bridging the gap between professional advice and general guidance.

Non-Mass-Market Investments (NMMIs)

Unregulated collective investment schemes (UCIS) are a type of non-mainstream pooled investment (NMPI). The FCA now classifies NMPIs as non-mass-market investments (NMMIs). Mass-marketing of NMPIs to retail investors is prohibited. These investments can only be marketed to investors who are deemed capable of understanding the associated risks, including:

• certified high-net-worth individuals;
• certified sophisticated investors; and
• self-certified sophisticated investors.

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. 

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.

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.

High Income Child Benefit Charge

The income threshold rises from £50,000 to £60,000.

Sustainability Disclosure

The Financial Conduct Authority (FCA) has introduced new rules on sustainability disclosure as part of its efforts to enhance transparency and accountability in the financial sector regarding environmental, social, and governance (ESG) issues.

The measures encompass an anti-greenwashing rule, a labelling system for sustainable investment products, and disclosure regulations. Additionally, they include requirements for consumer-facing information, detailed disclosures for institutional investors and interested consumers, and guidelines for distributors.

National Insurance Contributions

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

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, though 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.

Dividend Allowance

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

DC Pension Lump Sum Death Benefits

The total value of all tax-free cash and lump sums paid out during a member’s lifetime or upon death is measured against the Lump Sum and Death Benefit Allowance (LSDBA) of £1,073,100 (or the member’s higher protected amount, if applicable). Lump sums paid within two years of death that fall within this allowance are tax-free, while amounts exceeding the allowance are taxed at the beneficiary’s marginal income tax rate.

Innovative Finance ISAs

Long-term asset funds, open-ended property funds with extended notice periods and cash have been added to the list of qualifying investments in an innovative finance ISA.

UK ISA (British ISA)

This new ISA (once live) will offer an additional £5,000 allowance on top of the current ISA allowance, providing a new tax-free investment opportunity in the UK.

Thematic Review of Retirement Income Advice

In conducting this review, the FCA aimed to:

• obtain detailed insights into the functioning of the retirement income advice market;
• assess whether firms’ advice models address the specific needs of consumers in decumulation;
• determine if consumers are receiving appropriate retirement income advice when accessing pension savings benefits and address any identified issues; and
• guide future areas of focus.

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