In his Spring Budget 2024, before the forthcoming general election, The Chancellor of the Exchequer delivers lower taxes, more investment and better public services for the Long Term Growth.
With the Economy turning a corner and with inflation expected to fall to target next quarter, wages consistently rising faster than prices, the Chancellor capitalises on progress with ‘Budget for Long Term Growth’, sticking to the plan by putting over £900 a year back into the average worker’s pocket thanks to changes at Autumn Statement and a second Employee National Insurance tax cut from 10% to 8% in April.
NICs - For the second time this year, the Chancellor will cut employee national insurance by 2p to 8% from the new tax year. Combined with the 2p cut announced at Autumn Statement 2023, this will save the average worker on £35,400 over £900 year. The cut will come into effect from 6 April 2024.
Chancellor Jeremy Hunt said: The combined effects of these reductions to National Insurance means that a person on the average wage now has the lowest effective personal tax rate since 1975.
This, however, does not remove the threat of fiscal drag as tax thresholds are still frozen until 2028. Effectively basic rate taxpayers will now pay a combined tax rate of 28%, compared to 32% on 5 January. The basic rate tax threshold has been frozen at £12,570 since 2021, thus reducing the real impact of the national insurance cuts.
Class 4 NICs - The self-employed also get a second tax cut through a further 2p reduction in the NICs the main rate of Class 4 NICs from 8% to 6% - saving the average self-employed worker £650 when combined with cuts at Autumn Statement.
This means that from 6 April 2024 the main rate of Class 4 NICs for the self employed will now be reduced from 9% to 6%. Combined with the abolition of the requirement to pay Class 2, this will save an average self-employed person on £28,000 around £650 a year.
VAT - The VAT registration threshold will rise from £85,000 to £90,000 from 1 April - the first increase in seven years.
In a bid to support small business and sole traders, the Chancellor has increased the current £85,000 VAT threshold to £90,000. The £90,000 threshold will come in from 1 April, the first increase since 2017, although at £5,000 it is not likely to shift the dial. The move is designed to support businesses and sole traders which often put off growth due to the VAT compliance costs.
Full expensing – The Chancellor plans to extend full expensing to assets for leasing with draft legislation due shortly. He would introduce ‘draft legislation for full expensing to apply to leased assets as soon as cost efficient to do so’. The current full expensing regime has helped to push UK investment up to 10.6% of GDP, the highest rate since 2010. The plan is to ‘extend full expensing to assets for leasing when fiscal conditions allow’ and draft legislation will be published ‘shortly’.
Full Expensing provides 100% corporation tax relief for capital expenditure on plant and machinery, but currently only covers equipment purchased outright. This meant that any leased equipment could not benefit from the tax relief, with calls for an extension to leased kit ever since the full expensing rules were announced in the Autumn Statement.
HICBC – The High Income Child Benefit Charge to be assessed on a household-basis by April 2026, and immediate support for working families by increasing the threshold from £50,000 to £60,000 and raising the level at which Child Benefit is fully repaid to £80,000.
NHS - The NHS will receive an additional £3.4 billion as part of this to invest in new tech and digital transformation, including making the NHS app a single front door for patients, piloting new AI to halve form-filling times for doctors, rolling out universal electronic patient records, and over one hundred upgraded AI-fitted scanners so doctors can read MRI scans more accurately and quickly.
Non-Dom - The non domiciled individual, the so called ‘non-dom’ regime will be replaced by a simpler system where arrivals have access to a more generous scheme for their first four years of tax residency before paying tax in the same way as everyone else in the United Kingdom.
The chancellor confirms non-dom tax status will be “abolished” and replaced by a “modern, simpler and fairer” system from April 2025. The status is enjoyed by people who live in the UK but who have retained their overseas domiciled, often determined by whether their father was born abroad. The status means they pay UK tax on money earned in the UK, but not on their worldwide income. After four years, those coming to the UK will pay the same tax as other UK residents. Transition arrangements will be allowed for current non-doms.
Property tax – The Chancellor says the government will reduce the higher rate of property capital gains tax from 28% to 24%. He also announces the abolition of stamp duty relief for those buying more than one dwelling. The Chancellor believes this will bring in more overall revenue.
The move is designed to support the housing market from April 2024, which will affect owners of second homes and buy to let landlords selling their non-residential property. It will raise revenue and boost the availability of housing by encouraging residential disposals.
The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band.
Private residence relief will remain in place, meaning the vast majority of residential property disposals will pay no Capital Gains Tax.
Furnished Holiday lets – The Chancellor confirms plans to scrap the furnished holiday lets regime. The initiative gives tax reliefs on properties being rented out to holidaymakers and make renting out to holidaymakers more profitable than to long-term tenants. From April 2025, he said relief for furnished holiday lets would end.
Short term and long term furnished holiday lettings will be treated the same as long term landlords for tax purposes from next year. The Chancellor set out measures to remove tax incentives for short term landlords, making it the same as a landlord who is letting out a property longer term from April 2025.
The access to Capital Gains Tax relief will be abolished as well as any beneficial capital allowances. Also, it will no longer be possible to claim the exemption from finance cost restriction rules and the need to include relevant earnings when calculating maximum pension relief.
Although for Income Tax and Capital Gains Tax this is coming into force on 6 April 2025, for Corporation Tax and Corporation Tax on chargeable gains will be in force from 1 April 2025.
The arts - The government will spend £26.4m on the National Theatre to upgrade its stages. independent films with a budget of less than £15m will receive a new tax credit. The Treasury will also provide eligible film studios in England with 40% relief on their gross business rates until 2034.
Vape and tobacco duties - To discourage non-smokers from taking up vaping, Mr Hunt announced a new excise duty on vaping products that will come into force from October 2026.
At the same time, he said there will also be a one-off increase in tobacco duty “to maintain the financial incentive to choose vaping over smoking”.
Great British Isa – The Chancellor promised a new ‘British Isa’ which will provide another £5,000 of annual tax-free investment in UK equities.
He said this will “ensure that British savers can benefit from the growth of the most promising UK businesses” while supporting those firms to expand.
At the moment, Isa savers have an annual allowance of £20,000. But this will rise to £25,000 for British Isas.
Budget 2024: The key announcements of Chancellor Jeremy Hunt's speech
TAXES
Ø National insurance contributions for employees are being cut from 10% to 8% from April.
Ø Self-employed NI rates will drop by two percentage points as well.
Ø Higher rate of property capital gains tax will be reduced from 28% to 24%.
Ø The non-dom tax status has been abolished. It means foreign nationals who live in the UK, but are officially domiciled overseas, will no longer be able to avoid paying UK tax on their overseas income or capital gains. A "simpler" residency-based system will arrive in 2025.
Ø Stamp duty relief for people who purchase more than one dwelling in a single transaction, known as Multiple Dwellings Relief, is scrapped.
Ø The furnished holiday lettings regime has been abolished because it created "a distortion meaning that there are not enough properties available for long-term rental by local people".
Ø Air passenger duty will be raised for non-economy class plane passengers.
Ø The energy profits levy - the windfall tax on UK-produced oil and gas - is extended to 2029.
BENEFITS
Ø The High Income Child Benefit Charge, which hits payments if one parent earns above £50,000 a year, is to move to a household-based system. The threshold will rise to £60,000 from April 2024 in the meantime. The top of the taper where it is withdrawn is raised to £80,000.
Ø The household support fund is extended for a further six months.
Ø The £90 charge to get a debt relief order is abolished.
Ø Repayment periods for people on low incomes who take out new budgeting advance loans will increase from 12 to 24 months.
Ø A new British ISA will allow a £5,000 annual investment into in UK businesses. It includes all the tax advantages of other ISAs and will be on top of the existing allowances.
Ø To help people save, a new British Savings Bond, delivered through NSNI, will offer a guaranteed rate - fixed for three years.
TOBACCO AND VAPING
Ø Duty will be introduced on vaping liquids for the first time in October 2026. A one-off increase in tobacco duty will be made at the same time.
FUEL DUTY
Ø No change to fuel duty, with 5p cut announced in March 2022 still in place.
BUSINESS SUPPORT
Ø Full expensing for businesses will apply to leased assets in future "when affordable". Draft bill to be published shortly.
Ø VAT registration threshold for businesses upped from £85,000 to £90,000
Ø Eligible film studios in England will secure 40% relief on their gross business rates until 2034. Tax relief made permanent at 45% for touring and orchestral productions and 40% for non-touring productions.
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