Spring Budget 2024
The Spring Budget 2024 was delivered by Chancellor Jeremy Hunt on 6th March and below is our summary of the key tax announcements.
National Insurance Cuts
Last November’s Autumn Statement already introduced a 2% cut in employees’ national insurance from 12% to 10% and this became effective in January 2024. This is being cut again by a further 2% and will fall to 8% from April 2024.
Class 4 national insurance was reduced by 1% from 9% to 8% in the Autumn Statement but this was not due to take effect until April 2024. The Spring Budget further cut this by 2%, which means that the self-employed will now see a 3% reduction in national insurance to 6% from April 2024. This is in addition to the abolition of the weekly class 2 national insurance that the self-employed pay, though this can voluntarily be paid by low earning self-employed individuals for the time being in order to maintain eligibility for contributory state benefits.
The rationale behind reducing national insurance rates rather than income tax is to increase fairness and encourage more people into work. Only employees pay national insurance in addition to income tax whereas those earning income from other sources such as investments and property do not pay national insurance.
High Income Child Benefit Charge
The High Income Child Benefit Charge (HICBC) has been subject to much criticism ever since it was introduced in 2013 due its unfairness and complexity. 11 years after it was first introduced, a consultation has finally been announced to calculate the charge on a household basis rather than on an individual basis. The aim is to introduce this by April 2026 and in recognition of it not being a quick fix, the HICBC threshold will be increased on an individual basis to £60,000 from April 2024 and the charge will be halved so that it is not repaid in full until earnings reach £80,000. This will be a very welcome announcement for many.
Property Taxation
Furnished Holiday Lettings (FHL) currently benefit from more favourable tax treatment than properties let on a longer-term basis. This includes mortgage interest being fully tax-deductible versus only receiving a 20% tax credit for a long-term let, capital allowances being available, and a substantially lower capital gains tax rate on the sale of FHLs, as they can be eligible for Business Asset Disposal Relief (BADR) and taxed at 10% instead of the higher capital gains tax rate of 28% for other residential property. Due to the impact on local residents of investors ramping up their FHL activity in popular tourist destinations in the UK, the Chancellor announced that the FHL tax regime will be abolished from 6 April 2025. This means that all short-term and long-term residential properties will be taxed in the same way from that point.
An often–abused relief within the Stamp Duty Land Tax (SDLT) regime, Multiple Dwellings Relief, is being abolished from 1 June 2024. Multiple Dwellings Relief offers a bulk relief on SDLT when purchasing more than one dwelling at the same time. There have been some interesting court cases between taxpayers and HMRC in relation to Multiple Dwellings Relief in recent years, and it seems an easy win to remove this relief. Contracts already exchanged on or before 6 March 2024 will continue to benefit from the relief irrespective of when they complete, as will any other purchases that complete before 1 June 2024.
An unexpected announcement was the reduction in the higher rate of capital gains tax for residential property, which has been reduced from 28% to 24% from 6 April 2024 in an attempt to revive property sales which the government expects will increase tax revenues overall. The lower rate will remain 18% for any gains that fall within an individual’s basic rate band.
VAT Threshold
From 1st April 2024, the VAT registration threshold will inctease from £85,000 to £90,000, the first increase since 2017. The increase is intended to help small businesses grow without the need for them to register for VAT and the related impact on their pricing, profitability and administrative time and costs. We are somewhat surprised by this announcement given that the UK already has one of the highest VAT thresholds within the OECD and in our experience having such a high threshold has resulted in a cliff edge often preventing business owners from growing their business beyond the threshold. In line with the VAT registration threshold increase, the deregistration threshold will also increase from £83,000 to £88,000.
Tax-Efficient Savings
In a bid to encourage more individuals to invest in the UK, a consultation on a brand new ‘UK ISA’ will take place to introduce an additional £5,000 tax-free allowance on top of the existing £20,000 ISA allowance, specifically for investment in UK-focused assets.
It was also announced that National Savings & Investments (NS&I) will launch ‘British Savings Bonds’ to offer consumers a guaranteed interest rate, fixed for three years. This will be launched in early April 2024.
Non-Dom Regime
The current tax system for non-UK domiciled individuals, ‘non-doms’, will be abolished from 6 April 2025 and replaced with a simpler residence-based regime. From that point, individuals will not pay UK tax on any foreign income and gains arising in their first four years of tax residence in the UK, provided they have been non-tax resident for the previous 10 years. Once the four years have passed, the individuals will pay UK tax on all their foreign income and gains irrespective of their domicile status. Transitional arrangements for existing non-doms claiming the remittance basis will be in place for two years.
A consultation has also been announced on how best to move inheritance tax for non-doms to a residence-based regime, though any changes will not take place prior to 6 April 2025.
HMRC Funding
More resources will be made available to HMRC for tackling non-compliance and increasing their capacity to collect debts. These measures are forecast to increase tax revenue by £4.5 billion by 2028-29.
Additional investment to improve and simplify HMRC’s digital services for individuals in self assessment was also announced and this will be implemented from September 2025.
The government is also consulting on options to strengthen the regulatory framework in the tax advice market and on requiring tax advisers to register with HMRC if they wish to interact with HMRC on a client’s behalf. These are very welcome measures given how easy it currently is for unqualified and inexperienced tax advisers and accountants to undertake these activities.
