On Wednesday 6 March the Chancellor of the Exchequer, Jeremy Hunt, delivered the Spring Budget 2024 with a focus on delivering more jobs, more investment and lower taxes.

We've pulled out the key announcements from the Budget statement that we feel may impact you and your business.

Personal taxes and unincorporated businesses

Business taxes

Personal taxes and unincorporated businesses 

National Insurance – further reductions for employed and self-employed

A 2% decrease in National Insurance Contributions (NIC) for both employees and the self-employed was announced in the Spring Budget 2024. 

Following earlier cuts of 2% for employees and 1% for the self-employed announced in last year's Autumn Statement, further cuts have been made which now sees NIC for the employed and self-employed reduce to 8% and 6% respectively from 6 April 2024. This latest cut will result in savings for both self-employed and employees of up to £754 per annum.

High Income Child Benefit Charge (HICBC) reform

From 6 April 2024, the adjusted net income starting threshold for the HICBC will increase from £50,000 to £60,000. The rate at which child benefit is clawed back, once income exceeds £60,000 has been reduced, which means you will now have to have income of £80,000 before child benefit is entirely lost, compared to an income of £60,000 previously. Further changes will come into place by April 2026 following consultation whereby child benefit will move to a system based on household rather than individual incomes. 

Those with incomes up to £80,000 who currently claim child benefit but who opt not to receive payments may now wish to opt in to receive child benefit payments from April 2024.  

Introduction of the UK ISA

HM Treasury has launched a consultation on the introduction of a UK ISA with a stated policy objective “to support a culture of investment in the UK and to give people the opportunity to invest and benefit from the UK’s vibrant capital markets and high-growth companies”.  

The UK ISA will have its own annual allowance of £5,000, in addition to the existing £20,000 annual ISA allowance. Flexibility to make subscriptions across multiple UK ISAs in a tax year is being considered. It is proposed that transfers in from other types of ISA will be allowed but that transfers out to other types of ISA will not be permitted. 

The permitted asset class that can be held within a UK ISA is subject to consultation but may include equities listed on a UK recognised stock exchange or AIM listed stocks, units in collective investment vehicles, corporate bonds and gilts.

This may mean, if investment in AIM shares is permitted, that the new wrapper could be used to invest in assets that qualify for valuable IHT reliefs as well as exemption from income tax and capital gains tax (CGT).   

The timeline for introduction of the UK ISA is open for consultation as it will be dependent on the ability for interested stakeholders to deliver the necessary IT and reporting changes.

British Savings Bond 

The Chancellor mentioned plans to introduce a new British Savings Bond through National Savings and Investments (NS&I), which will offer consumers a guaranteed rate, fixed for three years. Details of what the rate will be is to be confirmed but we do know the bond is due to launch early April 2024.  

Abolition of Furnished Holiday Letting Tax Regime

Special tax treatments afforded to furnished holiday lettings (FHLs), will be abolished from 6 April 2025. This will see the loss of the following beneficial tax rules:

  • No longer a full deduction for mortgage interest costs.
  • No beneficial capital allowance rules – going forward only tax relief on replacement of domestic items.
  • Loss of generous CGT reliefs to include holdover relief, rollover relief and business asset disposal relief (BADR), the latter giving as low as a 10% CGT rate on disposal of a FHL.
  • Earnings no longer counted as relevant UK earnings when calculating income for pension contribution purposes.

FHLs will therefore, from 6 April 2025, be subject to the same tax regime as applies to UK (long term) lets.

Reduction in higher rate CGT for residential property

Currently, when a residential property is sold in the UK and the gain is subject to CGT (assuming no reliefs available), the rate of CGT payable is 18% where the capital gain falls within basic rate tax band, and 28% where the capital gain is in excess of the basic rate tax band. The higher rate of CGT will decrease from 28% to 24% from 6 April 2024. The lower rate of CGT will remain at 18%. The Government hopes that the reduction in the higher rate of CGT will result in more residential properties being sold, increasing the availability of housing. 

The date of disposal for CGT is the date that the sale becomes unconditional. The rate of CGT will reduce for all sales made on or after 6 April 2024. Where a sale becomes unconditional after 6 April 2024, the rate of CGT will reduce by 4% on any gains in excess of the higher rate band. However, for individuals the CGT annual exemption also decreases from £6,000 per taxpayer (in the tax year ended 5 April 2024) to £3,000 from 6 April 2024. For trustees and personal representatives, the tax-free allowance is currently fixed at £3,000. 

Moving forward, the reduction in the rate of higher rate CGT will help to some extent those individuals who currently have a FHL and will no longer be subject to as low as a 10% CGT rate on a disposal after 6 April 2025. 

Stamp Duty Land Tax (SDLT) – Changes to multiple dwellings relief

SDLT impacts land and property transactions in England and Northern Ireland only. 

Multiple dwellings relief (MDR) is a relief which can reduce the amount of SDLT where you purchase more than one residential property as part of a single transaction.  

For transactions completing on or after 1 June 2024 (or which are substantially performed on or after 1 June 2024), MDR will be abolished where two or more dwellings are purchased in a single or linked transaction. MDR may still apply for transactions where contracts have been exchanged on or before 6 March 2024, or where substantial performance occurs before 1 June 2024. 

Generally, where MDR is available it can provide an SDLT saving as it allows the purchaser to calculate the SDLT based on the average value of the dwellings purchased as opposed to their aggregate value.  

This change will, therefore, be seen as creating an additional transaction cost for buyers where two or more dwellings are being purchased at the same time. This is likely to impact the agricultural sector, landed estates, property investors, developers acquiring residential property, and even property portfolio incorporations.  

The latter categories may not be fully impacted by these changes given that individuals or businesses purchasing six or more dwellings, or mixed property (i.e. purchases which consist of both residential and non-residential property) at the same time, will still continue to qualify for the non-residential rates of SDLT.  

As Land and Buildings Transaction Tax (LBTT) (the equivalent of SDLT in Scotland) is a devolved tax, these proposed changes will not have an immediate impact on transactions involving the purchase of two or more dwellings in Scotland. However, the position may now be under review by Revenue Scotland and changes to MDR in Scotland may be implemented in the next Scottish Budget. 

Inheritance tax reforms

Currently, UK Inheritance tax is based on domicile, not residence. In the Spring Budget it was announced that the Government are looking to move to a residence-based approach for determining if you have UK Inheritance tax to pay. There will be a consultation on this with a view to the change taking place from April 2025. 

Extension to Agricultural Property Relief (APR) from 6 April 2025

The Budget announced the extension of the scope of APR. This is an inheritance tax relief that historically can relieve up to 100% of the agricultural value of land, outbuildings and farm cottages and farmhouses occupied and used alongside the land.

Now the relief will also extend to land managed under an environmental agreement from 6 April 2025. One key point of note is that relief will only apply where the land was qualifying agricultural land for at least two years immediately before the land use change. HMRC is to provide guidance on how the agricultural use would be evidenced in due course, and comments provided in the consultation output from HMRC and HM Treasury suggests that this should be worded in a way that the evidence gathering is not too onerous.

Business Property Relief (BPR)

No changes will be made to the scope of BPR, however, a consultation response from HMRC does confirm that land registered and validated to the Woodland Carbon and Peatland Codes to generate carbon units will qualify in principle for BPR. This is in line with the changes made to HMRC's IHT manuals last year.  

Carbon units generated from the environmental land, including pending issuance units (PIUs), may qualify for BPR where they are used in, or are an asset of, a qualifying business.

Taxation of ecosystem service markets

The Budget has provided an update on the output of a previous consultation around the taxation of ecosystem service markets, which includes carbon sequestration and biodiversity. The consultation had been considering amongst other things the tax treatment of carbon units under the Woodland and Peatland Carbon Codes. 

It would seem that the Government has recognised the uncertainty of the tax treatment for such schemes and if this falls to be a capital or income receipt, and are putting in place a joint HM Treasury and HMRC working group with industry representatives to gather views and provide more tax certainty as required.

Non domicile regime

The Chancellor confirmed that the UK’s beneficial tax regime which applies to individuals who are not domiciled in the UK will be abolished from April 2025. A new system will be introduced for individuals moving to the UK (after at least a 10-year period of consecutive non-UK residence) which will provide a four year period where foreign income and gains will not be subject to UK tax and can be remitted to the UK without charge. This will encourage investment in the UK and simplifies the tax rules significantly. 

Existing tax residents who have not yet been UK resident for four years may also benefit from this new scheme until they complete their fourth year of UK tax residence.

After four years of UK tax residence individuals will pay UK tax based on normal UK tax rules. Anti-avoidance rules will also be adapted to mitigate potential avoidance of the new rules through offshore entities.

There will be a transitional period in 2025/26 and 2026/27 where individuals can remit historic foreign income and gains (on which the remittance basis has applied) and a reduced rate of tax at just 12% will apply.  This will be of significant benefit to many who might otherwise have incurred tax at up to 45% (48% in Scotland) when bringing historic foreign income and gains to the UK.   

Transitional rules will apply to those individuals already resident in the UK and to individuals who currently benefit from the remittance basis of taxation. The transitional rules include:

  • Only half of the foreign income arising in 2025/26 will be subject to UK tax for those individuals from whom the remittance basis of taxation has been withdrawn and who are not eligible for the four year exemption because, for example, they have already been UK resident for more than four years.  
  • The above relief will not apply to foreign capital gains as there will instead be a rebasing in the base cost of non-UK situs capital assets to the value at 6 April 2019 for disposals after 6 April 2025, but only where the individual has claimed the remittance basis in the past.
  • A temporary repatriation facility will apply for the tax years 2025/26 and 2026/27 providing for a 12% tax rate on amounts to be remitted to the UK where a tax liability would otherwise arise. This will not apply to income or gains within a protected trust arrangement.

We know from past experience that changes to these rules and the transitional reliefs following on from those changes provide tax planning opportunities, but care is needed in navigating the rules and meeting the conditions of the relief(s). We await the consultation document and draft legislation to understand the detail behind the proposed changes.

The above announcement relates to the application of income tax and capital gains tax only at this time.

HMRC is also to consult on a reform of the inheritance tax (IHT) regime applying to non-UK domiciled individuals and have meantime confirmed that the existing IHT rules will apply to trusts settled by non-UK domiciled individuals on or before 5 April 2025 which mitigates what could have been an area of great uncertainty. From 6 April 2025, an individual will be subject to UK IHT on their worldwide assets after they have been UK resident for 10 years. If an individual leaves the UK after being resident for 10 years, they will remain subject to UK IHT on their worldwide assets for a further 10 years. Whilst this gives individuals more certainty about when they are subject to UK IHT, it may bring a significant number of people into the UK IHT net who did not expect to pay UK IHT.

Late payment and late submission penalties

The Government had previously announced that they would be changing the system for late submission penalties to a “points based system” for individuals who submit Income tax, VAT or Making Tax Digital returns late. These changes are designed to punish persistent late filers more harshly, but it may mean a taxpayer is not punished in certain circumstances for a one-off isolated late return.

These changes are due to be introduced gradually from 6 April 2026 for Income tax, but have applied to VAT from 1 January 2023.

HMRC has announced some changes in how the rules will work, including a harmonisation of how late payment interest is calculated for Income Tax and VAT.

Closing offshore avoidance loophole

HMRC is tightening a set of anti-avoidance rules known as the transfer of assets abroad rules. These rules subject individuals to income tax where they transfer assets to a person abroad (e.g. a non-UK trust or a non-UK company) to avoid UK tax. A recent case changed the interpretation of these rules where an individual makes the transfer to a non-UK person through a UK company. HMRC is tightening these rules to ensure that individuals cannot avoid UK tax by making the transfers via UK companies.

 

Business taxes

Corporate Tax

The Spring Budget didn’t contain any key announcements from a Corporation Tax perspective but the following should be noted:

  • As a reminder, the main rate of Corporation Tax is set at 25% from 1 April 2023 (on profits of more than £250,000) with a small profits rate of 19% (on profits less than £50,000). Marginal relief may apply for profits between these limits.
  • Our Corporate Tax team will continue to work with our clients to establish the impact of associated companies on the rate and timing of the Corporation Tax they pay, as well as planning for optimal utilisation of tax losses.
  • We await the detail of the proposed Furnished Holiday Letting changes to establish any impact for our clients holding such properties through a corporate vehicle.

Capital Allowances 

Slim pickings from a Capital Allowances perspective, but the Chancellor has confirmed the commitment made in the 2023 Autumn Statement to make full expensing permanent. 

This allows companies to claim 100% in-year relief for qualifying main rate capital expenditure on plant and machinery and 50% in-year relief for qualifying special rate capital expenditure. This will provide greater certainty and will allow the planning of long-term investments and large infrastructure projects. 

At a time of high interest rates when companies are facing higher costs, having cash up front has become more valuable than a stream of future lower payments through writing down allowances. 

Plant and machinery for leasing, second-hand assets and cars are currently excluded from being eligible for full expensing, however, after a technical consultation on extending full expensing to assets for leasing, draft legislation will be published shortly. It is intended that full expensing will be extended to assets for leasing, but only when fiscal conditions allow. 

VAT and Indirect Taxes 

Indirect Taxes 

Similarly to the 2023 Spring Budget, many of the Chancellor’s indirect tax announcements concerned duty changes, or made reference to matters which will be consulted on in the future. However, unlike last year, there was one VAT announcement of relative significance. 

Duty 

On the former, the freeze on alcohol duty, which was due to end in August 2024, will continue for another year until February 2025, which will be welcomed by some 38,000 UK pubs. Like last year, however, calls for a reduced rate of VAT for the hospitality sector were not addressed. Many in the sector continue to point to the discrepancies in indirect tax treatment of the retail and hospitality environments. 

Excise duty will apply to vapes from October 2026, following a consultation, and the existing tobacco duty in place will be increased in order to maintain the financial incentive to choose vaping over typical tobacco smoking.   

Fuel duty has been frozen for a further twelve months as the 5p cut announced in March 2022 remains for another year. 

Finally, air passenger duty will be increased in respect of non-economy travel. 

VAT 

From a VAT perspective, contemporary change was limited to the announcement that the VAT registration threshold will increase to £90,000 from £85,000, with effect from 1 April 2024, at which point the deregistration threshold will also increase from £83,000 to £88,000.  

The first rise in seven years, many smaller businesses may feel that this increase doesn’t go far enough to help. Inflation has meant that in recent years many smaller traders have been drawn into the VAT regime through a necessary reflecting of cost increases in their charging prices, and many organisations do cluster at turnover just under the threshold to avoid having to increase prices a further 20%.  

Future commitments 

Beyond this, further indirect tax developments were confined to commitments to future change and consultation. On top of the consultation on how to apply excise duty to vaping, consideration will be given to the VAT treatment on private hire vehicles following the recent High Court ruling regarding Uber, and the VAT Terminal Markets Order will be updated to seek to address ambiguity on the VAT treatment of the sale of carbon credits. 

Innovation Taxes 

R&D tax relief  

Compared with recent fiscal events, the Spring Budget was a relatively quiet affair from an R&D tax relief perspective. The single merged scheme is due to come into force from April 2024, along with other changes including a territorial restriction applying to subcontractor payments and costs in respect of the provision of externally provided workers. Government and HMRC continue to consult on the R&D tax relief schemes, and it was announced as part of the Budget that HMRC will establish an expert advisory panel to support the administration of the reliefs. It is hoped that the panel will provide insights into the R&D occurring across key sectors such as technology and life sciences, and work with HMRC to review relevant guidance, ensuring it remains up to date and provides clarity to claimants.   

For a number of years now, there has been real concern over perceived abuse and boundary-pushing involving the R&D tax reliefs, particularly by some SMEs. With a view to raising standards in the tax advice market, the Government is publishing a consultation both on options to strengthen the regulatory framework in the market, and on requiring tax advisers to register with HMRC if they wish to interact with HMRC on a client’s behalf. We welcome this consultation and hope that any subsequent changes will allow HMRC to apply its resources more effectively, meaning genuine claimants can benefit from the reliefs, with the incidence of inaccurate and spurious claims reduced.  

Support for independent film 

Acknowledging the value of the film production sector to the UK, the Government has introduced legislation to provide additional support for independent films through the Audio-Visual Expenditure Credit. The new Independent Film Tax Credit will be 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, which should translate to net relief of 39.75% of the core costs incurred. Qualifying expenditure will be capped at a maximum of 80% of a film’s total core expenditure, with an upper end relief cap also in place meaning that the maximum tax credit a film can receive will be £6.36 million. These 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. 

Additional tax relief for expenditure on visual effects 

The Government will give additional tax relief to visual effects costs in films and high-end TV. Under the Audio-Visual Expenditure Credit, visual effects costs will receive tax credit at a rate of 39%. The 80% cap on qualifying expenditure will also be removed for visual effects costs. A consultation will also be published on the types of expenditure that will be within scope of the additional tax relief. 

Permanent extension for higher rates of Theatre Tax Relief, Orchestra Tax Relief, and Museums and Galleries Tax Relief 

The Government had previously increased the rate of relief available under Theatre Tax Relief, Orchestra Tax Relief, and Museums and Galleries Tax Relief to support these industries during and exiting the COVID-19 pandemic. As part of the Spring Budget the government has announced that the increased rates will be made permanent.  

 

Employer Services

Employee NIC reduction  

Class 1 Primary NIC rate will be reduced by a further 2% from the 2023 Autumn statement. This will reduce the rate to 8% (from 10%) for earnings between the primary earnings threshold and the upper earnings limit, and this will apply from 6 April 2024. 

This is good news for workers meaning take home pay will increase by around £450 per year for a taxpayer on an average salary (£900 per year when combined with the 2% cut previously announced in the Autumn Statement 2023). However, this has to be considered alongside the freeze on income tax thresholds, meaning more people are moving into higher rates of income tax and the reality is that this “fiscal drag” could largely cancel out the NIC cuts. No decrease has been announced for Class 1 Secondary NIC which will remain at 13.8%. 

Self-employed NIC reduction 

Class 4 NIC which applies to profits made by self-employed workers, will similarly reduce from 8% to 6% from 6 April 2024 for earnings between the lower profits limit and upper profits limit. This 2% combined with the 1% reduction from Autumn 2023 will save an average self-employed person on £28,000 around £650 per year.  

High income child benefit charge  

The High Income Child Benefit Charge (HICBC) threshold will increase to £60,000 (from £50,000) from April 2024. The rate at which the HICBC is charged will also be halved so that Child Benefit is not fully withdrawn until individuals earn £80,000 or more. Further planned reforms in the future will include administering the HICBC on a household rather than an individual basis by April 2026, and the Government will be consulting in due course. 

Some additional measures noted: 

Tackling non-compliance in the umbrella company market: 

  • An update will be provided shortly on the 2023 consultation on tackling non-compliance in the umbrella company market. New guidance will also be published in Summer 2024 to support workers and other businesses who use umbrella companies. 

Class 2 National Insurance Contributions (NICs):  

  • At the 2023 Autumn Statement, the Government announced the removal of the requirement to pay Class 2 NICs from April 2024 and committed to abolishing Class 2 NICs completely. Consultation will begin later in 2024 on the details of this reform.   

Oil & Gas

The Chancellor has extended the oil & gas windfall tax (energy profits levy) from 31 March 2028 by an additional year to 2029. The extension is expected to raise an additional £1.5 billion for the Government. However, while not unexpected, it is not welcome news for the local economy in the north-east of Scotland where the instability is resulting in cuts and delays in investments from the oil & gas operators, with even the Conservative Party leader in Scotland publicly opposing the extension.

In the Autumn Statement, the Chancellor announced that ‘full expensing’ (a form of corporation tax relief enabling companies to claim a 100% deduction for certain capital expenditure) would be permanent. In the Spring Budget, the Chancellor announced that the Government will look to extend this measure further, to include expenditure incurred on plant and machinery for leasing. This could benefit some businesses in the energy sector, such as tool rental and equipment leasing companies that have been prevented from claiming full expensing to date.

Alexandra Docherty

Partner and Head of Private Client Tax

Alexandra Docherty

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Susie Walker

Partner and Head of Tax

Susie Walker

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