Spring Budget 2024
Following widespread speculation of tax cuts, with Child Benefit and National Insurance being key topics, the Chancellor of the Exchequer (Jeremy Hunt) delivered his Spring Budget on the 6th of march, focusing on tax cuts for workers and parents.
As usual, the Spring Budget started with commentary on the general economic situation, with the Chancellor explaining that he expects inflation will continue to fall and to fall below the target of 2% in ‘just a few months; just under a year earlier than previously forecast.
Economic growth targets for the next two years remain largely unchanged, with a slight increase since the previous targets were announced in the 2023 Autumn Statement. Growth in GDP during 2024 is expected to be 0.8% (previously 0.7%) and in 2025 is expected to be 1.9% (previously 1.4%).
With workers and parents at the heart of the Chancellor’s Spring Budget, Personal Taxes were the main focus, together with changes to simplify the rules.
Changes to Personal Taxes
National Insurance
With effect from 6 April 2024, the rate of employees National Insurance on earnings between £12,570 and £50,270 per year will be reduced, by 2%, from 10% to 8%.
Together with the reduction, from 12% to 10%, announced in the 2023 Autumn Statement, this is a total reduction of 4% within one year.
At the same time, for those who are self employed, the National Insurance on profits between £12,570 and £50,270 per year will be reduced, also by 2%, from 8% to 6%.
Child Benefit
The threshold at which Child Benefit starts to be clawed back is currently £50,000 and this is being increased to £60,000 from 6 April 2024.
Furthermore, the rate at which the benefit is clawed back, currently 1% for every £100 over the threshold, will change to 1% for every £200 over the new threshold.
This is a reduction in the rate at which the benefit is clawed back and the benefit will not be fully clawed back until earnings reach £80,000; as opposed to £60,000 under the current rules.
The Chancellor also announced that he will consult on a change for the benefit to apply to the collective income of a household, rather than the individual with the highest income. It is aimed that this will be introduced by April 2026.
Capital Gains Tax
The Chancellor announced a cut to the higher rate of Capital Gains tax on the disposal of a residential property in the UK, by 4%, from 28% to 24%. It is hoped this will promote more activity in the UK housing market.
The basic rate of Capital Gains Tax on residential property remains at 18%.
Furnished Holiday Lets
Previously, those with furnished holiday lets have benefited from tax breaks. This includes Capital Allowances on the purchase of furniture, equipment and other ‘capital’ items, and more generous Capital Gains Tax rules when selling the property.
The special rules for furnished holiday lets will be abolished and the income will be taxed in the same way as for residential lets from April 2025.
Stamp Duty Land Tax
The Chancellor announced that he will abolish multiple dwellings relief, which provided relief from SDLT on transactions involving more than one property. It is thought that the relief is not being used for the purpose that it was created for.
Non-Domiciled Individuals
Following a significant amount of media coverage in recent years, and increasingly in recent months, on non-domiciled individuals and the favourable taxation of their foreign income and gains, the Chancellor today announced that the current rules will be abolished.
New rules will be introduced from April 2025 and non-domiciled UK tax resident individuals will not be required to pay UK tax on foreign income and gains for the first 4 years after they arrive in the UK. After 4 years they will be required to pay UK tax on their worldwide income and gains, in the same way as UK domiciled individuals.
ISA allowance
Whilst the limit for new subscriptions into ISAs remains at £20,000 per annum, the Chancellor announced a new type of ISA, to be known as a ‘British ISA’, which will have its own annual subscription limit of £5,000.
The ‘British ISA’ will be invested exclusively in UK companies, whereas other ISAs can be invested globally.
Changes to Business Taxes
VAT Registration
From 1 April 2024 the registration threshold for VAT is being increased, by £5,000, from £85,000 to £90,000.
The deregistration threshold is also increasing from £83,000 to £88,000.
Capital Allowances
The Chancellor announced that draft legislation will soon be published extending ‘full expensing’ of capital expenditure by companies to leased assets. However, the Chancellor also explained that the extension will only be introduced when ‘fiscal conditions allow’.
Changes to Other Taxes
The windfall tax on the profits of oil and gas companies has been extended to 2029. The freeze on alcohol duty that was due to end in August 2024 has been extended until February 2025.
A levy on vaping is being introduced and a one-off increase in tobacco duty, so as not to dissuade smokers from using vaping as a way to quit smoking.
Air Passenger Duty will increase for those travelling business class.The freeze on fuel duty will be extended for a further 12 months together with the temporary 5p cut, which was due to end this month. Fuel duty will, therefore, remain at 53p.
Changes are to be made to the rules for ISAs to simplify their administration and to allow individuals to subscribe to more than one type of ISA in a year, providing their total investment is within the annual limit.