Spring Budget 2024 – Key Issues

Introduction

• The Chancellor, Jeremy Hunt, has just delivered the Government’s Spring Budget, which could well be the last fiscal statement before the next General Election (due to be held no later than January 2025).
• The Chancellor was able to point to a reduction in the rate of inflation since he came to office in late 2022 (from 11% to 4%, with a further expected fall to below 2% in the next few months). However, as growth levels remain relatively low, he was not expected to have a lot of room for manoeuvre in terms of spending commitments or tax cuts.
• As is now customary, there was a lot of speculation about the measures to be introduced, and so the headline measure – a 2% drop in the employee/self-employed NIC rate – was well trailed. As had also been discussed in the press, he announced the removal of ‘non-dom’ status, albeit to be replaced by a new regime for individuals coming to the UK.
• From the point of view of taxation, there were a number of other key measures of interest to businesses (and their owners and employees). Further details are set out below.

Income Tax/ NICs

• The main rate of employee’s and self-employed (Class 4) NIC will both reduce by a further 2% from 6 April 2024. As a result, from that date the main rate of employee’s NIC will be 8%, and the Class 4 rate will be 6%.
• On High Income Child Benefit Charge (HICBC), the Government announced it’s intention to move this to a ‘household’ based threshold with effect from April 2026. In the meantime, the starting threshold has been increased from £50,000 to £60,000, with a taper applying to the charge for individuals with income up to £80,000.
• A new ‘UK ISA’ will be introduced (following consultation), to allow investment in UK equities of up to £5,000. This will bring the total amount an individual can hold in an ISA from £20,000 to £25,000.

Full expensing and film tax credits

• Full expensing provides a 100% deduction for expenditure on new and unused assets that would otherwise qualify for the main pool capital allowances relief over a number of years, reducing a Company’s corporation tax bill in the year of the expenditure by up to 25% of the expenditure incurred. Special Rate Pool assets can qualify for a 50% First Year Allowance.
• Assets used for leasing (along with land & buildings and cars) are ineligible for the allowance. However, draft legislation will be published for technical consultation, in order to consider the potential extension of full expensing to include plant and machinery for leasing. This will be ‘subject to future decision’, meaning that any change would only be expected when the economic conditions allow.
• A new UK Independent Film Taxation Credit will allow eligible films (those with a production budget up to £15m and meet the requirements of a new British Film Institute test) to claim a 53% enhanced audio visual expenditure credit on qualifying expenditure. Designed to boost the production of UK independent films and support UK talent, productions will need a “theatrical release” in order to qualify

Property taxes

• The Furnished Holiday Letting Regime is to be abolished with effect from April2025. Landlords who previously benefited from tax advantages under this regime may see an increase in their tax liabilities (through losing eligibility for capital allowances and mortgage interest relief), as well as losing various capital gains tax(CGT) reliefs.
• The higher rate of CGT on residential properties will be reduced from 28% to 24%,with this change taking effect from 6 April 2024. The lower rate will remain at 18%for any gains that fall within an individual’s basic rate band.
• For SDLT, multiple dwellings relief (MDR, which can reduce the overall effective rate of SDLT where more than one dwelling is purchased) will be abolished for transactions with an effective date from 1 June 2024, with transitional rules for contracts exchanged on or before 6 March 2024.

Other matters

The existing non-domicile rules will be abolished and replaced with a ‘simpler residence-based regime’. Under the new regime, individuals (who will opt in to it) will not pay UK tax on foreign income and gains for the first four years of UK tax residence. There will also be transitional arrangements for existing non-domiciled individuals claiming the remittance basis including a two year ‘Temporary Repatriation Facility’ to bring previously accrued foreign income and gains into the UK at a 12% rate of tax. The new regime will take effect from 6 April 2025.

The VAT registration threshold will increase £85,000 to £90,000 (effective from 1 April 2024). This is the first increase since 2017. The deregistration threshold will also increase, from £83,000 to £88,000.

If you would like to discuss any of the matters arising from today’s Statement, please contact any member of the tax team.