Spring Budget 2024
There were actually very few new announcements (even fewer if you discount items trailed). Whilst there were some significant ones, quite a few were sufficiently vague as regards detail and timing that you wonder whether they will actually happen – especially if/when there is a change of Government.
The economy
The Chancellor insisted that the economy has turned the corner. He has delivered on the Prime Minister’s three economic priorities: ‘inflation has fallen, growth has been more resilient than expected, and debt is forecast to fall’. The Office for Budget Responsibility (OBR) is forecasting inflation below 2% by 2024 Q2. Whilst growth has been lower than forecasted, the International Monetary Fund now thinks that the UK will have the third fastest cumulative growth in the G7 over the period 2024–28. Mr Hunt asserted that the debt and borrowing fiscal rules are on track to be met.
Individuals
Employee National Insurance contributions (NICs) will be cut to 8% from April 2024 and self-employed Class 4 NICs will be reduced to 6%. Whilst a cut in income tax might have gained more headlines, a cut in NICs targets workers. Indeed the Chancellor is hinting that one day he would like to get rid of NICs altogether but, in current economic circumstances that can be regarded as wishful thinking.
The Chancellor gleefully stole the Labour Party’s planned abolition of non-dom tax status (though he said it had been Nigel Lawson’s idea). These rules enable non-UK domiciled individuals living in the UK to avoid UK tax by keeping overseas income and gains offshore. From April 2025 onwards, overseas income and gains will be exempt from UK tax for the first four years of residence. From year five onwards, non-doms will be taxed on worldwide income and gains in the same way as any other UK resident. Transitional measures will ease the change for existing non-doms.
It is widely recognised that the high income child benefit charge is sub-optimal. Under that regime, child benefit is clawed back from families where at least one parent earns over £50,000. The rules are seen as unfair because they apply based on individual, rather than household, income. From April 2026, therefore, the high income child benefit charge will apply on a household basis. In the meantime, from 6 April 2024, the high income child benefit charge threshold will be increased to £60,000.
Individuals who dispose of a residential property which isn’t their main residence currently pay tax on any gain at 28%. From 6 April 2024, this rate is to be reduced to 24%, meaning that it may be better to defer taxable sales.
A new ‘UK ISA’ which will have its own £5,000 annual allowance is coming, but no indication of when – only that the details will be consulted upon.
There were no substantive changes to inheritance tax – certainly not the abolition which some commentators had predicted. However, it was confirmed that agricultural property relief and woodland relief are to be restricted to property in the UK and the ‘grants on credit’ requirements will be eased. There is an intention to replace the non-doms regime with a residence based regime from April 2025.
Alcohol duty will now remain frozen until February 2025. In addition, fuel duty will be frozen for another year until March 2025. In contrast, the Chancellor announced the introduction of a duty on vaping products in October 2026, and a one[1]off increase in tobacco duty at the same time. The alcohol duty stamps scheme is to close.
Property tax
The furnished holiday lettings rules are to be abolished from April 2025. As this regime gives tax breaks to landlords who let out property on a short-term basis, its abolition must be intended to encourage lettings to longer-term tenants. This is a major change for holiday letting businesses.
Rooted in the same intention to free up properties, the stamp duty land tax multiple dwellings relief is to be abolished for transactions with an effective date on or after 1 June 2024 (subject to transitional provisions).
Businesses
There was strikingly little for businesses – no reduction in employer NICs and no adjustment to the main corporation tax rate of 25% % and will maintain the small profits rate of tax at 19% for financial year 2025.
For small businesses it was announced that the VAT registration threshold is to increase from £85,000 to £90,000 from 1 April 2024; businesses may feel that this relatively small increase is not sufficient to compensate for the fact that this will be the first increase in seven years.
Of wider interest, full expensing is to be extended to leased assets. No indication of timing for this but draft legislation will be published for consultation shortly.
One area that did get some attention was creative industry reliefs. The Chancellor announced:
a new independent film credit at 53% of qualifying expenditure (with a cap) for films that commence principal photography from 1 April 2024 on expenditure incurred from that date;
the permanent extension of higher rates of theatre tax relief, orchestra tax relief and museums and galleries tax relief; and
additional relief for expenditure on visual effects.
Contact Ashored for more information and support on the impact of the changes.
