March 2024 Budget
Spring Budget 2024 summary
We have set out below a summary of the main changes announced in the Chancellor’s Budget speech to the house on 6 March 2024. Jeremy Hunt was looking to be fiscally responsible whilst at the same time help the Conservative electoral campaign. Most of the measures, including a further cut in National Insurance for employees and the self-employed had already been widely expected. It remains to be seen, whether the Chancellor was able to do enough to help the fortunes of his Party.
The main tax changes are listed below:
Personal Tax
Further fall in employee National Insurance contributions (NIC)
As expected, the Chancellor announced a further reduction of 2% in employee NICs, from 10% to 8%, effective from 6 April 2024.
Taken together with the previous 2% drop announced at the Autumn Statement, this represents a reduction in this tax charge by one-third. It means that a person earning £35,400 will be more than £900 a year better off.
NIC cuts for the self-employed
The Chancellor made a further reduction in the Class 4 NIC rate paid by the self-employed. The further 2% cut will be a reduction in Class 4 NICs from 8% of chargeable profits to 6%. This is on top of the 1% cut announced in the Autumn Statement. Taken together, the overall reduction in Class 4 NICs will be from 9% to 6% effective from 6 April 2024.
High Income Child Benefit Charge (HICBC)
From 6 April 2024, the income threshold at which the HICBC can recover Child Benefits from parents is being increased from £50,000 to £60,000. The band of income that will affect the amount of any HICBC clawback is also doubled, from £60,000 to £80,000.
From April 2024, Child Benefits will be subject to the HICBC at a rate of 1% of benefits received for every £200 the highest paid parent exceeds £200. This means that when the highest paid earner’s income exceeds £80,000, all Child Benefits will be recovered.
For new Child Benefit claims made after 6 April 2024, any backdated payment will be treated for HICBC purposes as if the entitlement fell in the 2024-25 tax year if backdating would otherwise create a HICBC liability in the 2023-24 tax year.
Capital Gains Tax (CGT) on UK residential property sales
The higher rate of CGT for residential property gains is being reduced from 28% to 24%. The change will take effect from 6 April 2024. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band.
The 18% and 28% rates of CGT that apply to gains in respect of carried interest remain unchanged from 6 April 2024. These rates previously mirrored those for CGT on disposals of residential property.
Restriction in scope of Agricultural Property Relief and Woodlands Relief
The scope of Agricultural Property Relief and Woodlands Relief will be restricted to property in the UK. Property located in the European Economic Area (EEA), the Channel Islands and the Isle of Man will be treated the same as other property located outside the UK. The changes will take effect from 6 April 2024.
Stamp Duty Land Tax – Multiple Dwellings Relief (MDR)
The MDR is being abolished. This change will come into effect for transactions with an effective date on or after 1 June 2024. Transitional rules mean that MDR can still be claimed for contracts which are exchanged on or before 6 March 2024, regardless of when completion takes place. This is subject to various exclusions, for example, that there is no variation of the contract after that date.
Changes to Non-UK Domiciled tax rules
The Government will abolish the remittance basis of taxation for non-UK domiciled individuals and replace it with a simpler residence-based regime, which will take effect from 6 April 2025. Individuals who opt into the regime will not pay UK tax on foreign income and gains for the first four years of tax residence.
Overseas Workday Relief (OWR) will be reformed with eligibility for the relief based on the new regime. OWR will continue to provide Income Tax relief for earnings from duties conducted overseas for the first three years of tax residence with restrictions on remitting these earnings removed.
The Government has also announced an intention to move to a residence-based regime for Inheritance Tax, with plans to publish a policy consultation on these changes, followed by draft legislation for a technical legislation, later in the year.
A new ISA
A new British ISA with its own allowance of £5,000 a year is to be introduced for investments in UK equity. Further details of the new scheme will be released later this year.
Income Tax rates and allowances
No changes to the main Income Tax rates were announced. The Personal Allowance remains at £12,570. The basic rate, higher rate and additional Income Tax bands remain unchanged as do the Income Tax rates. These rates are not due to change before April 2028 although of course if a new Government is voted in then changes could be expected.
Vaping Products Duty
The Government has published a consultation on the detailed design and implementation of the duty, which will close on 29 May 2024. Registration for the duty will open on 1 April 2026 with the duty taking effect from 1 October 2026 alongside a proportionate increase in tobacco duties.
The duty will apply to liquids for use in vaping devices and e-cigarettes at the following rates:
• £1 per 10ml for nicotine free liquids
• £2 per 10ml for liquid containing nicotine at concentrations between 0.1 to 10.9mg per ml
• £3 per 10ml for liquids containing nicotine at concentrations 11mg per ml, or above
The Government will also make a one-off tobacco duty increase of £2 per 100 cigarettes or 50 grams of tobacco from 1 October 2026.
Alcohol Duties
These duties will be frozen from 1 August 2024 until 1 February 2025. This extends the present six-month freeze announced last year.
Fuel Duty main rates
The rates of Fuel Duty introduced at the Spring Statement in March 2022, and extended at the Spring Budget the following year, will be extended for a further 12 months.
This will maintain the cut in the rates for heavy oil (diesel and kerosene), unleaded petrol, and light oil by 5 pence per litre, and the proportionate percentage cut (equivalent to 5 pence per litre from the main Fuel Duty rate of 57.95 pence per litre) in other lower rates and the rates for rebated fuels, where practical.
The changes will take effect from 23 March 2024.
Business Tax
VAT registration threshold increase
The taxable turnover threshold which determines whether a person must be registered for VAT, will be increased from £85,000 to £90,000. The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £83,000 to £88,000. These changes take effect from 1 April 2024.
This small increase will benefit some smaller businesses who are trying to stay under the VAT registration threshold.
Corporation Tax (CT) rates
For the financial year beginning 1 April 2025, the rates of CT will remain unchanged. The main rate will stay at 25% with the reduced small profits rate at 19%.
Abolition of the Furnished Holiday Lets (FHL) tax regime
The Chancellor claimed the current rules are “creating a distortion” and that the tax benefits of letting properties as short-term holiday lets will be abolished from April 2025. This could cost landlords using FHLs up to £600m in tax.
Draft legislation will be published at a future date and will include an anti-forestalling rule. This will prevent the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains relief under the current FHL rules. This rule will apply from 6 March 2024.
Full expensing to be extended to leased assets
Full-expensing of plant or machinery for leasing is currently excluded from a claim under the full-expensing or the 50% first year allowance for special rate assets. The Government will shortly publish draft legislation to bring leased assets into these reliefs.
Support for independent filmmakers
This relief will benefit independent filmmakers and will be provided via the Audio-Visual Expenditure Credit.
The Independent Film Tax Credit is aimed at films that have budgets (or total core expenditure) of up to £15 million and that receive a new accreditation from the British Film Institute. The credit rate will be 53% of qualifying expenditure. Qualifying expenditure is capped at a maximum of 80% of a film’s total core expenditure; the most taxable credit a film can receive will be £6.36 million.
The changes will take effect for films that commence principal photography from 1 April 2024 on expenditure incurred from 1 April 2024. Claims may be submitted from 1 April 2025.
Permanent extension for higher rates of Theatre, Orchestra and Museums and Galleries Tax Reliefs
This change introduces a permanent extension to the 40%/45% (for non-touring/touring and orchestral productions respectively) headline rates of relief for Theatre Tax Relief, Orchestra Relief, and Museums and Galleries Exhibition Tax Relief. This permanent extension will take effect from 1 April 2025.
Energy Profits Levy — One year extension
As announced in the 2024 Spring Budget, the Government will extend the sunset end date of the Energy Profits Levy to 31 March 2029. This is expected to raise a further £1.5 billion for the Treasury.