Budget For Long Term Growth – Spring 2024

INDIVIDUALS

Personal Tax and National Insurance

National Insurance

The Chancellor announced a further cut in employee national insurance by 2p from 10% to 8% from April 2024. This is on top of the cut already in place from January 24 announced in the Autumn Statement 23 which reduced the NIC from 12% to 10%. Both of these cuts combined this will save the average worker over £900 a year on a salary of £35,400. “We will continue to cut national insurance contributions as we have done today so we truly make work pay”, Jeremy Hunt told MPs.

There is also a cut in the main rate of self-employed National Insurance by 2p from 8% to 6%. From 6th April 2024 this will save the average self-employed person on £28,000 per year around £650 a year. This is combined with the abolishment of Class 2 NIC which The Chancellor announced in his Autumn Statement last year.

He said “the tax system should be fair, simple and reward hard work. Reducing employee and self-employed National Insurance is the best way to target working people, supporting growth and making the tax system fairer”.

Child Benefit Charge

The high income child benefit charge is another part of the tax system the Chancellor wants to make fairer and will consult further in due course on a proposed household based system from April 2026. The Chancellor announced that he will be raising the threshold from £50,000 to £60,000 from April 2024 which will take 170,000 families out of paying this tax. The rate of the charge will also be halved so that Child Benefit will not be repaid in full until you earn £80,000. This is estimated to give half a million families a gain on average of £1,260 in 24/25.

British ISA

Chancellor Jeremy Hunt announced a boost to the amount people can save and invest tax-free and launched a new ISA allowance today, the British ISA.

The British ISA will see savers benefit from an extra £5,000 allowance per year if they invest in UK equity. This is on top of the existing £20,000 ISA annual allowance. It will grow the UK economy, reward investors and support British business. The Chancellor said “After a consultation on its implementation, I will introduce a brand new British ISA which will allow an additional £5,000 annual investment for investments in UK equity with all the tax advantages of other ISAs”.

Property

Capital Gains Tax

The higher rate of Capital Gains Tax for residential property is being reduced to 24% from 28%, a reduction of 4%. The basic rate is remaining the same at 18%. This will apply from 6 April 2024.

Principal private residence relief applies to an individual’s main residence, so this generally only applies to second properties.

The Chancellor stated that by reducing the rate of CGT, this will encourage landlords and second homeowners to sell their properties thereby raising more tax revenue and making it easier for first time buyers to get on the property ladder.

Furnished Holiday Lets

The favourable tax treatment of Furnished Holiday Let properties is being abolished.

Previously, furnished holiday let properties (short term holiday rental properties) benefitted from being able to deduct financing costs from their profit, a favourable CGT rate on disposal (10% compared to 28%), the availability of capital allowances, and the ability to contribute profits into a pension when compared with standard property businesses.

All of this is being abolished and furnished holiday lets will be taxed the same as any other property business.

The rationale behind this is that previously it incentivised holiday letting, making it more difficult for people to acquire homes in their local area, particularly if they lived in areas with high tourism. This change will now level the playing field.

This will take effect from April 2025.

This is going to have a significant impact on those who own properties in their personal name and let them out as holiday rentals, particularly if there is a mortgage over the property. We will be contacting clients who are affected.

Multiple Dwellings Relief

Multiple Dwellings Relief is a stamp duty relief which reduced the effective rate of stamp duty land tax paid on transactions where more than one dwelling is being acquired within the same transaction.

It benefitted transactions where, for example, a block of flats was being purchased, or a row of houses on the same street.

The relief was designed to support investment in the Private Rental Sector however there is no evidence the relief is having this effect and it resulted in fraudulent claims.

Multiple Dwellings Relief is therefore being abolished.

Property transactions with contracts that were exchanged before 6 March 2024 will continue to benefit, as will any other purchases that complete before 1 June 2024.

This is going to have an impact on property investors who acquire more than one property in a transaction as it will increase the amount of stamp duty land tax payable.

Non Domiciles

The current regime for non-domiciled individuals is being abolished. Under the regime, individuals who are UK resident, but non-UK domiciled could avoid paying UK tax on their unremitted overseas income and gains. This benefitted wealthy foreign individuals who are living in the UK.

They could benefit from this regime whilst living in the UK for up to 15 years.

If the individual was UK domiciled, this option would not be available to them as they would pay UK tax on their worldwide income and gains, irrespective of if the funds get remitted to the UK or not.

The concept of domicile is where an individual sees as their home. The concept of being tax resident is based on the number of days and how many ties an individual has with the UK.

The issue with the old rules is domicile is difficult to prove either way and there were no tests to determine somebody’s domicile. This results in people with every intention of remaining in the UK but maintaining a domicile elsewhere, resulting in significant tax savings.

The residency system is based on, factual residency tests which gives a certain result and removes grey areas.

The old non-Dom regime is therefore being abolished and replaced with a simpler, modernised residence-based regime that is fairer and more competitive.

Under the new regime, anybody who has been tax resident in the UK for more than four years will pay UK tax on their foreign income and gains, as is the case for other UK residents.

This will apply from 6 April 2025. There will be transitionary rules to ensure that those who were benefitting from the old Nom-Dom regime are not unfairly penalised.

The other main impact of being non-UK domiciled, is that only UK assets are subject to Inheritance Tax. The government is consulting on how to move this to a residence-based regime, but no changes will take effect before 6 April 2025.

BUSINESS

As predicted the corporate announcements were very minor as the Chancellor used all resources to give tax cuts for voters.

VAT Threshold

The current registration limit for VAT is £85,000 and increasing to £90,000 from 1 April 2024. Whilst this is a positive move it only affects those trades dealing with the public who are unable to pass on the VAT increase.

The deregistration limit will also move from £83,000 to £88,000.

Full Expensing

In the Autumn Statement the big announcement was the full expensing rule to allow for tax relief on investment. The Chancellor announced this will also be extended to leased assets although no date is set and when fiscally viable.

We have yet to see how this new relief has impacted on investment in the UK and if it has promoted growth.

UK Independent Film Tax Credit Relief

A new relief is being introduced for 53% rate of tax relief for films with budgets under £15m that meet the qualifying conditions

Cultural Tax Reliefs

During the pandemic the rate of tax reliefs for theatres for example was increased to 45% for touring companies, this is set to become permanent. This includes theatres, orchestras, museums and galleries.

Read more about our services here. More info can be found on the HMRC website