Spring Budget 2024 – HFM Tax Blog

The impact of the tax changes announced in the Spring 2024 Bud­get is sum­ma­rized below.

Impact on personal finances

Fur­ther decline in employ­ee social secu­ri­ty con­tri­bu­tions (NIC)

As expect­ed, the Chan­cel­lor has found scope in the 2024 Spring Bud­get to make a fur­ther reduc­tion of 2 per­cent­age points from 10% to 8% from April 2024.

Com­bined with the pre­vi­ous 2% fall fol­low­ing the autumn return, this rep­re­sents a reduc­tion in this tax bur­den by a third. This means a per­son earn­ing £35,400 will be more than £900 a year bet­ter off.

High Income Child Sup­port Charge (HICBC)

From 6 April 2024, the income lim­it at which HICBC can claim child ben­e­fit back from par­ents will increase from £50,000 to £60,000. The income range affect­ing the amount of a HICBC claw­back will also be dou­bled, from £60,000 to £80,000.

From April 2024, child ben­e­fits will be sub­ject to HICBC at the rate of 1% of the ben­e­fits they receive for every £200 in excess of £200 paid by the high­est paid par­ent. This means that if the high­est earn­er’s income exceeds £80,000, all child ben­e­fit will be refund­ed.

For new claims for child ben­e­fit made after April 6, 2024, any retroac­tive pay­ment will be treat­ed for HICBC pur­pos­es as if the claim had fall­en in the 2024–25 tax year if back­dat­ing would oth­er­wise cre­ate a HICBC lia­bil­i­ty in the tax year would emerge in 2023–24.

Cap­i­tal Gains Tax (CGT) on the sale of res­i­den­tial prop­er­ty in the UK

The high­er CGT rate on home own­er­ship gains will be reduced from 28% to 24%. The change will come into effect on April 6, 2024. The low­er rate remains at 18% for any win­nings that fall with­in an indi­vid­u­al’s base rate band.

The 18% and 28% cap­i­tal gains tax rates applic­a­ble to gains from trans­ferred inter­est will remain unchanged from April 6, 2024. These rates pre­vi­ous­ly cor­re­spond­ed to those for cap­i­tal gains tax on sales of res­i­den­tial prop­er­ties.

Lim­it­ing the scope of relief for agri­cul­tur­al prop­er­ty and forests

The scope of relief for agri­cul­tur­al prop­er­ty and wood­land will be lim­it­ed to prop­er­ties in the UK. Prop­er­ties locat­ed in the Euro­pean Eco­nom­ic Area (EEA), the Chan­nel Islands and the Isle of Man are treat­ed in the same way as oth­er prop­er­ties out­side the UK. The changes will come into effect from April 6, 2024.

Stamp Duty Prop­er­ty Tax – Mul­ti­ple Dwellings Relief (MDR)

The MDR will be abol­ished. This change will be effec­tive for trans­ac­tions with an effec­tive date on or after June 1, 2024. Due to the tran­si­tion rules, MDR can con­tin­ue to be claimed for con­tracts exchanged on or before March 6, 2024, regard­less of when the con­clu­sion occurs. This is sub­ject to var­i­ous exclu­sions, for exam­ple that there will be no change to the con­tract after this date.

Changes to tax rules for non-UK res­i­dents

The gov­ern­ment will abol­ish the remit­tance basis of tax­a­tion for non-UK res­i­dents and replace it with a sim­pler res­i­dence-based regime, which will come into force on April 6, 2025. Indi­vid­u­als who opt for the scheme pay no UK tax on for­eign income and gains for the first four years of tax res­i­den­cy.

The Over­seas Work­day Relief (OWR) is being reformed so that peo­ple are enti­tled to relief based on the new reg­u­la­tion. OWR con­tin­ues to pro­vide income tax relief on income from tax­es col­lect­ed abroad dur­ing the first three years of tax res­i­den­cy, while remov­ing restric­tions on the remit­tance of this income.

The gov­ern­ment has also announced its inten­tion to move inher­i­tance tax to a res­i­dence-based regime and plans to pub­lish a pol­i­cy con­sul­ta­tion on these changes lat­er in the year, fol­lowed by draft tech­ni­cal leg­is­la­tion.

A new ISA

A new UK ISA is to be intro­duced for invest­ing in UK stocks with its own allowance of £5,000 per year. Fur­ther details of the new pro­gram will be released lat­er this year.

Flat income tax rates and allowances

One area of ​​per­son­al tax­es that was not relaxed in the Spring 2024 Bud­get announce­ments was the fis­cal bur­den cre­at­ed by the freeze on the income tax allowance and the upper income thresh­old.

The per­son­al income tax allowance (cur­rent­ly £12,570) and the high­er rate thresh­old (cur­rent­ly £50,270) at which you pay 40% rather than 20% income tax have not seen a sig­nif­i­cant increase for over four years.

Dur­ing the same peri­od, the con­sumer price index (CPI) rose from 108 to 132. To keep up with infla­tion, based on the CPI increase, a salary of £45,000 in April 2020 would now need to be £55,000 to main­tain the same pur­chas­ing per­for­mance. And as the high­er thresh­old remains unchanged at £50,270, the top £4,730 will be taxed at 40% rather than 20%.

Based on the CPI change, the cur­rent per­son­al allowance should be around £15,400 and the high­er rate thresh­old should be £61,400 to main­tain their mon­e­tary val­ue.

The income tax allowance and the high­er tax rate thresh­old remain unchanged and will not be reviewed again until April 2028.

Manda­to­ry for e‑cigarette prod­ucts

The gov­ern­ment has pub­lished a con­sul­ta­tion on the detailed design and imple­men­ta­tion of the tax, which clos­es on May 29, 2024. Reg­is­tra­tion for the tax begins on April 1, 2026, with the tax tak­ing effect on Octo­ber 1, 2026, and tobac­co tax­es increas­ing accord­ing­ly.

The fol­low­ing tax rates apply to liq­uids for use in e‑cigarettes and e‑cigarettes:

• £1 per 10ml for nico­tine free liq­uids
• £2 per 10ml for liq­uids con­tain­ing nico­tine in con­cen­tra­tions between 0.1 and 10.9mg per ml
• £3 per 10ml for liq­uids con­tain­ing nico­tine at a con­cen­tra­tion of 11mg per ml or more

The gov­ern­ment will also imple­ment a one-off increase in tobac­co tax of £2 per 100 cig­a­rettes or 50 grams of tobac­co from Octo­ber 1, 2026.

Alco­hol tax­es

These tar­iffs will be frozen from August 1, 2024 to Feb­ru­ary 1, 2025. This extends the cur­rent freeze announced last year for six months.

Main tax rates for fuels

Fuel tax rates intro­duced in the March 2022 Spring State­ment and extend­ed in the March 2023 Spring Bud­get will be extend­ed for a fur­ther 12 months.

This main­tains the 5p per liter reduc­tion in rates for heavy fuel oil (diesel and kerosene), unlead­ed petrol and light oil, as well as the cor­re­spond­ing per­cent­age reduc­tion (equiv­a­lent to 5p per liter against the main fuel tax rate of 57.95p per liter) in oth­er low­er rates rates and dis­count­ed fuel rates where prac­ti­ca­ble.

The changes will come into effect from March 23, 2024.

Impact on UK businesses

Increas­ing the VAT reg­is­tra­tion thresh­old

The tax­able turnover thresh­old, which deter­mines whether an indi­vid­ual must be reg­is­tered for VAT, will increase from £85,000 to £90,000. The tax­able turnover thresh­old, which deter­mines whether an indi­vid­ual can apply for dereg­is­tra­tion, will increase from £83,000 to £88,000.

These changes will come into effect from April 1, 2024.

This will ben­e­fit small­er traders who are head­ing towards the cur­rent reg­is­tra­tion thresh­old of £85,000 and do not actu­al­ly want to reg­is­ter as they will not be able to pass on the 20% VAT to their cus­tomers.

NIC cuts for the self-employed

The Chan­cel­lor has made a fur­ther cut to the Class 4 NIC paid by the self-employed. The fur­ther reduc­tion will be a reduc­tion from 8% of tax­able prof­it to 6%. Essen­tial­ly, the over­all reduc­tion will be from 9% to 6% from April 6, 2024.

No change in cor­po­rate tax (CT) rates.

For the fis­cal year begin­ning April 1, 2025, the CT rates will remain unchanged. The main rate remains at 25%, the reduced rate for small win­nings at 19%.

Abo­li­tion of the Fur­nished Hol­i­day Lets (FHL) tax sys­tem.

In a sur­prise announce­ment, the cur­rent­ly favor­able tax ben­e­fits for rent­ing out prop­er­ties as short-term hol­i­day rentals are to be abol­ished from April 2025.

The draft law will be pub­lished at a lat­er date and will con­tain an anti-afforesta­tion rule. This pre­vents obtain­ing a tax advan­tage through the use of uncon­di­tion­al con­tracts to obtain cap­i­tal gains relief under the cur­rent FHL rules. This reg­u­la­tion applies from March 6, 2024.

Full expense com­pen­sa­tion should be extend­ed to leased assets

Cur­rent­ly, the full off­set­ting of equip­ment or machin­ery to be leased is exclud­ed from enti­tle­ment to full off­set­ting or the 50% first year sub­sidy for assets with a spe­cial inter­est rate.

The gov­ern­ment will soon pub­lish draft leg­is­la­tion to include leased assets in these reliefs.

Sup­port­ing inde­pen­dent film­mak­ers

This relief ben­e­fits inde­pen­dent film­mak­ers and is pro­vid­ed through the Audio­vi­su­al Expen­di­ture Cred­it.

The Inde­pen­dent Film Tax Cred­it is aimed at films with bud­gets (or total core expen­di­ture) of up to £15 mil­lion that receive new accred­i­ta­tion from the British Film Insti­tute. The loan rate is 53% of eli­gi­ble expens­es. Eli­gi­ble expens­es are lim­it­ed to a max­i­mum of 80% of a film’s total core expens­es. The high­est tax­able cred­it a film can receive is £6.36 mil­lion.

The changes will come into effect for films start­ing film­ing from April 1, 2024, on expens­es incurred from April 1, 2024. Claims can be sub­mit­ted start­ing April 1, 2025.

Per­ma­nent exten­sion for high­er tax relief for the­aters, orches­tras and muse­ums and gal­leries

This change affects the per­ma­nent exten­sion of 40% and 45% (for non-tour­ing/­tour­ing and orches­tral pro­duc­tions) of the gen­er­al the­ater tax relief, orches­tral tax relief and muse­um and gallery tax relief. These tar­iffs apply from April 1, 2025.

Ener­gy gain levy – exten­sion for one year

As announced in the Spring Bud­get 2024, the Gov­ern­ment will extend the expiry date of the Ener­gy Gains Levy to March 31, 2029. This is expect­ed to raise a fur­ther £1.5 bil­lion for the Trea­sury.

OUR SUMMARY

From a tax per­spec­tive, there are no rad­i­cal changes in the 2024 spring bud­get, although the Chan­cel­lor appears to have abol­ished as much as he cre­at­ed new reg­u­la­tions.

The Chan­cel­lor’s bud­get speech to par­lia­ment was also pep­pered with many points against the oppo­si­tion par­ties. We will have to wait and see whether the con­tents of the Spring 2024 Bud­get result in a suf­fi­cient rise in poll num­bers to prompt the Prime Min­is­ter to cam­paign for a gen­er­al elec­tion in May.