Spring Budget 2024 – Top 10

Following the Spring Budget, Tax updates have been announced, ranging from National Insurance cuts to alterations in the taxation of non-domiciled residents, which could significantly impact personal finances and investment strategies.

Here’s our top 10:

(Read Time: Approx. 8 minutes)

Topics Discussed:

Ten important points made from the Spring Budget 2024
The impacts this may have on you or your business.

1. Cuts to National Insurance Contributions

Employees will see the main rate of Class 1 primary NI drop to 8%, down from 10%, translating into annual savings of over £450 for individuals earning the average salary of £30,400.

Individuals earning higher salaries will continue to contribute 2% National Insurance (NI) on their earned income over £50,270.

Class 4 NI for self-employed individuals will be decreased by 2%, falling to 6%.

This reduction is applicable to self-employed profits ranging from £12,560 to £50,270.

This adjustment, effective from April 2024, complements a previous 2% cut initiated in January, doubling the annual NI savings to £900 for many.

2. Revamped Taxation Rules for Non-Domiciled Residents

A significant overhaul is on the horizon for non-domiciled residents, with a shift from the current remittance basis of taxation to a new four-year regime starting 6 April 2025.

This change will allow qualifying individuals moving to the UK to enjoy a four-year grace period, during which foreign income and gains are not subject to UK tax, even if brought into the country.

Post-grace period, these individuals will face taxation on worldwide income and gains, marking a substantial shift in tax strategy for non-doms.

Non-domiciled individuals residing in the UK before 6 April 2025, and who have lived in the UK for less than four years, will also be eligible for the grace period for the remaining duration of those four years.

3. Transitional Rules for Long-Term Non-Dom Residents

In tandem with new taxation rules for non-doms, transitional regulations will ease the transition for existing residents accustomed to claiming the remittance basis.

These include:

A uniform rate of 12% on any personal foreign income and gains accrued before 5 April 2025 and remitted to the UK between 6 April 2025 and 5 April 2027. This does not extend to remittances of historical foreign income and gains from offshore trust structures, which will be subject to standard rates.

A limitation to 50% of the foreign income (excluding gains) assessable on an arising basis for the tax year 2025-2026 only.

An option to rebase assets held on 5 April 2019, to mitigate capital gains tax on future disposals.

From 6 April 2026, all foreign income and gains will be assessable on an arising basis, regardless of whether it has been transferred into the UK.

Settlors of offshore trusts will be subject to assessment on trust income and gains on an arising basis from 6 April 2025.

4. Adjustments to the High-Income Child Benefit Charge (HICBC)

From 6 April 2024, the income threshold at which individuals are liable for the High-Income Child Benefit Charge (HICBC) will rise from £50,000 to £60,000.

Additionally, the rate at which the HICBC reduces the benefit will halve, as the current threshold for full repayment of the benefit will increase from £60,000 to £80,000.

At present, for every £100 of ‘adjusted net income’ over £50,000, claimants must repay 1% of the maximum child benefit entitlement, meaning that for earnings of, for example, £55,000, 50% is repaid through self-assessment, and 100% is repaid at £60,000.

The budget revisions stipulate that the ‘recovery’ will be 1% for every £200 above £60,000, so that for an adjusted net income of £70,000, 50% of the child benefit is repayable, with 100% repaid at £80,000.

5. Reduced Capital Gains Tax on Residential Property

The current highest rate of capital gains tax (CGT) on residential property gains is 28%. This rate will be reduced to 24%.

Private Residence Relief (PRR) will continue to be applicable, meaning that the sale of one’s only or main home will not be affected by this change. Gains on such properties remain exempt from CGT, so individuals selling their sole residence will still incur no CGT on the profit.

For basic rate taxpayers, there will be no alteration, as the CGT rate for residential property gains remains at 18%, applicable only to those who have not fully utilised their basic rate band for income tax.

6. End of the Furnished Holiday Lets Regime

The Furnished Holiday Lettings (FHL) tax regime, known for offering a range of tax advantages, is scheduled to be phased out from April 2025.

This change will introduce significant implications for numerous holiday let businesses:

They will lose the ability to deduct capital allowances for expenses on items such as furniture and the property’s fixtures and fittings (e.g. plumbing and electrical systems). Consequently, the taxable income for FHL operators is expected to rise.

The sale of an FHL business will no longer be eligible for the Capital Gains Tax (CGT) rate of 10% under Business Asset Disposal Relief (BADR). Despite the general CGT rate for residential property decreasing from 28% to 24%, FHL operators will face a 14% hike in their CGT rates.

Additionally, rental earnings from FHLs will not be considered qualifying earnings for pension contributions anymore.

7. Abolition of Multiple Dwellings Relief (MDR)

This action represents the complete elimination of the Multiple Dwellings Relief (MDR) system, rather than focusing solely on its more controversial aspects, which was a potential outcome hinted at in a HMRC consultation initiated in November 2021.

MDR has been a significant Stamp Duty Land Tax (SDLT) concession, typically resulting in lower SDLT payments.

Introduced in 2011, MDR aimed to benefit buy-to-let investors—a sector the Government was more favourable towards at that time.

It achieved this by calculating SDLT based on the average value of the properties being purchased and then multiplying this SDLT amount by the number of properties involved.

This method helped mitigate the effect of higher residential SDLT rates that would apply if the total purchase price was treated as a single property purchase.

MDR will no longer apply to any transactions where the exchange of contracts occurs after 5 March 2024 and the completion does not take place by the end of May 2024.

However, transactions that have exchanged contracts by 5 March 2024 will remain eligible for the relief upon completion, provided there are no changes to the contract after that date.

8. Expansion of Full Expensing for Companies

In the Autumn Statement, it was revealed that the temporary measure of ‘full expensing’ relief would become a permanent feature.

Full expensing allows for an uncapped, 100% first-year capital allowance for qualifying expenditures within the main pool and a 50% first-year allowance for expenditures within the special rate pool.

It enables businesses to fully deduct the cost of qualifying plant and machinery investments from their taxable income.

This is in line with the decision to maintain the Annual Investment Allowance (AIA) at its current cap of £1 million permanently.

However, unlike the AIA, any plant and machinery assets for which full expensing has been claimed will be subject to immediate balancing charges upon disposal.
These charges are equal to 100% of the disposal value for main pool assets and 50% for assets in the special rate pool.

9. Increased VAT Thresholds

VAT registration thresholds will see an increase of £5,000, effective from 1 April 2024.

The adjustments are as detailed below:

For VAT registration, the current threshold of £85,000 will be raised to a new threshold of £90,000.

For VAT deregistration, the current threshold of £83,000 will be raised to a new threshold of £88,000.

The purpose behind this adjustment is to postpone the moment when small and medium-sized enterprises (SMEs) are required to register for VAT.

This initiative is designed to support SMEs in their growth by providing them a competitive edge, allowing them to sell taxable supplies without the need to add VAT, thereby encouraging expansion.

10. Introduction of the Great British Savings and Investments Scheme

This additional ISA allowance is set to provide tax benefits for up to £5,000 of investments in UK assets, aiming to bolster UK companies.

This comes on top of the existing £20,000 ISA allowance.

The introduction of an extra £5,000 annual allowance marks the first increase in the ISA limit since 2017, although this increase is specifically earmarked for investments in UK equities.

Moreover, individuals will have the opportunity to invest in ‘British Savings Bonds,’ a new offering from National Savings and Investments (NS&I).

These bonds will feature a guaranteed fixed interest rate starting April 2024 for the initial three years, with funds being directed to support UK businesses.

Summary

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