Spring Budget 2024: A Summary

Chancellor Jeremy Hunt delivered his ‘Budget for Long Term Growth’ on Wednesday 6 March 2024 in what many believe will be the last fiscal statement before a general election.  His Spring Budget speech promised ‘more investment, more jobs, better public services and lower taxes’.

Despite the Government’s fiscal rules and a challenging economy, many saw it as the last opportunity for the government to cut income taxes and win public support.  Indeed, in our last post following the Autumn Statement, we wondered whether we would see some tax giveaways.

During that Autumn Statement, a 2p cut in National Insurance Contributions for employees and the self-employed was announced. It was widely trailed ahead of the Spring Budget this week that a further 2p reduction in NICs would be proposed and Jeremy Hunt duly announced this measure. NICs were originally introduced as mechanism to fund benefits such as the State Pension but are, in reality, a tax paid by workers in addition to income tax. Jeremy Hunt announced his intention to abolish what he called ‘double taxation’ when it could be delivered responsibly.

The Prime Minister previously pledged to reduce the basic rate of income tax to 19% in this parliament but there was no “rabbit out of the hat” surprise announcement in the Chancellor’s speech. With unchanged income tax rates and personal allowance, the effect of “Fiscal Drag” means that the tax burden continues to rise for many.

There were some notable changes and proposed reforms to existing taxes in the Spring Budget, specifically the abolition of “Non – Domiciled” tax status for individuals and the removal of the Furnished Holiday Property Letting regime, the latter being directly referenced by the Chancellor to impact on the South West. This may not be a big revenue raiser in the grand scheme of things but will no doubt be disappointing for many of our clients.

Perhaps surprisingly, the Chancellor reduced the higher rate of capital gains tax for residential property from 28% to 24% and announced an increase in the VAT registration threshold from £85,000 to £90,000 – the first increase in 7 years. Changes were also made to address unfairness in the High-Income Child Benefit Charge – a move to household income was announced for 2025 with the threshold increasing to £60,000 and a maximum limit of £80,000 in the meantime.

Overall, there were not the significant tax giveaways that many were expecting from this budget but nonetheless, there were some noticeable changes and reform made to existing taxes.  We will of course consider these changes further and update you as more detail is announced.

National Insurance contributions

The Chancellor has previously announced major changes to the National Insurance contributions (NICs) system in the Autumn Statement.

Following the Autumn Statement in 2023 the government cut the main rate of Class 1 employee NICs from 12% to 10% from 6 January 2024. The government has further cut the main rate of Class 1 employee NICs from 10% to 8% from 6 April 2024.

The flat rate class 2 NIC will be abolished for self-employed individuals with profits above £12,570 from 6 April 2024 and the government will cut the main rate of Class 4 self-employed NICs from 9% to 6% from 6 April 2024.

Non-UK domiciled individuals

From 6 April 2025, the current remittance basis of taxation for non-UK domiciled individuals will be abolished and replaced with a residence-based regime. Individuals who opt into the new regime will not pay UK tax on any foreign income and gains arising in their first four years of tax residence, provided they have been non-tax resident for the last ten years. Anyone who has been tax resident in the UK for more than four years will pay UK tax on their foreign income and gains.

The government will also introduce transitional arrangements for existing non-UK domiciled individuals claiming the remittance basis.

High Income Child Benefit Charge

The High Income Child Benefit Charge (HICBC) is a tax charge that applies to higher earners who receive Child Benefit, or whose partner receives it.

The government is increasing the income threshold at which HICBC starts to be charged from £50,000 to £60,000 from April 2024. The rate at which HICBC is charged will be halved from 1% of the Child Benefit payment for every additional £100 above the threshold to 1% for every £200. This means that Child Benefit will not be withdrawn in full until individuals have ‘adjusted net income’ of £80,000 or more.

In addition, the government plans to administer the HICBC on a household rather than individual basis by April 2026, with a consultation in due course

Furnished Holiday Lettings

The Furnished Holiday Lettings (FHL) tax regime will be abolished from April 2025. Draft legislation is to be published and will include anti-forestalling measures that will apply from 6 March 2024. The effect of abolishing the rules will be that short-term furnished holiday lets and longer-term residential lets are treated the same for tax purposes and individuals will no longer need to report the two income streams separately.

Capital Gains Tax rates

The Capital Gains Tax (CGT) rate remains at 10%, to the extent that any income tax basic rate band is available, and 20% thereafter.

Higher rates apply for certain gains, mainly chargeable gains on residential properties, with the exception of any element that qualifies for Private Residence Relief. These rates are changed from 18% and 28% in 2023/24 to 18% and 24% in 2024/25.

The VAT registration threshold

After many years of having been frozen, the government will increase the VAT registration threshold from £85,000 to £90,000 and the deregistration threshold from £83,000 to £88,000 from 1 April 2024. The government has stated that these new thresholds will be frozen but has not stated for how long.

Stamp Duty Land Tax changes

The main changes made to the Stamp Duty Land Tax (SDLT) regime was the abolition of Multiple Dwellings Relief.  This will broadly be from 1 June 2024 but subject to transitional rules, for purchasers of residential property in England and Northern Ireland.  There were also changes to First-Time Buyer Relief to extend it to individuals buying a new residential lease via a nominee or bare trust for transactions with an effective date (usually the date of completion) on or after 6 March 2024.  This again will be subject to transitional rules.

Individual Savings Accounts

The government announced that it is looking to introduce the UK ISA.  This will have a new ISA allowance of £5,000 in addition to the existing ISA allowance, and will provide a new tax-free savings opportunity for people to invest in the UK.

Other changes

• The alcohol duty freeze will be extended until February 2025.

• The temporary 5p cut in fuel duty rates will be extended until March 2025 and the planned inflation increase for 2024/25 will not take place.

• A new duty on vaping products will be introduced from 1 October 2026. The government will also introduce a one-off tobacco duty increase from the same date.