This is our first review of the Spring 2024 Budget, delivered 6th March 2024.
Our review has been written contemporaneously, and will not be updated for later changes fiscally or politically.
Our review is focused, as always, on a typical client of Whitefield Tax & YogaTax, and isn’t comprehensive. However we have reviewed all HMRC and Treasury documents published with the budget to look for “smoking guns”.
Setting the Scene
Clearly this is a Pre Election Budget, and the circumstances are well known:
- Politically weak Government facing defeat in the polls
- Sluggish economy with low growth and high inflationary pressures
- Conflicts in Ukraine and Gaza
- Global recovery process from pandemic
The Chancellor’s room for manoeuvre was limited, and almost certainly he would have wished to do more as a pre election show case.
Personal Tax and NI
- 2% cut to main NI rate for employees from 6th April. – main rate now 8%.
- High Income Child Benefit Charge thresholds increased. There is now no taper if the highest earning parent earns £60,000 (previously £50.000), the charge tapers out the benefit over the next £20,000 (previously £10,000) making the upper threshold £80,000 (previously £60,000). The effect of this is that the taper rate is halved on top of the increased lower threshold. This applies from 6th April 2024. Longer term the Government plans to reform HIBC to work on a household basis, with a target date of April 2026.
- Removal of the tax exemptions for Non Domiciled individuals from 6th April 2025, along with removal of the concept of Domicile from the UK tax system.
- No change to Income Tax rates, thresholds or allowances.
- No change in NI thresholds.
- Pre announced reduction in Dividend Allowance from 6th April 2024 to £500. No changes to Dividend Tax rates.
Business Tax
- Class 4 NI to reduce from 9% to 6% from 6th April 2024 – 1% of this was announced in the Autumn of last year, the other 2% announced today.
- Class 2 NI is no longer payable by most Self Employed from 6th April 2024 but they continue to accrue State Pension and benefit rights. Effectively it drops to £0.00 rather than being abolished. For those with small business profits, below £6,725 a year, voluntary Class 2 contribution can be made at £3.45/week, paid annually via Self Assessment, to preserve State Pension and Benefits.
- No change in NI thresholds for Self Employed.
- No changes to Employer NI rates.
- No change to Corporation Tax rates and thresholds.
- No change to Capital Allowance rates and thresholds.
- Some increases to Corporation Tax credits for Independent Film Producers.
- Changes to Corporation Tax relief for Theatres, Orchestras and Galleries to make some, but not all, of the post covid enhancements to these schemes permanent.
- Harmonisation of penalties for late submission or payment across Making Tax Digital for VAT and Income Tax.
- Furnished Holiday Lettings tax regime to be abolished – this was a half way system between property taxation and self employment, and in most cases Furnished Holiday Lettings will be treated like any other property now. These changes are from April 2025. Quoting from HMRC, on the current benefits of the FHL regime, and what will therefore be lost:
- you can claim Capital Gains Tax reliefs for traders (Business Asset Rollover Relief, relief for gifts of business assets and relief for loans to traders)
- you’re entitled to plant and machinery capital allowances for items such as furniture, equipment and fixtures
- the profits count as earnings for pension purposes
- Updated HMRC guidance on the deductibility of training costs for sole traders – no new relief or change of boundaries, just clearer guidance
https://www.gov.uk/guidance/check-if-the-cost-of-training-could-be-an-allowable-business-expense
VAT
- VAT registration threshold rises from £85k to £90k.
- No change in VAT rate or scope.
Capital Taxes
- Higher Rate of CGT on Residential Property to reduce from 28% to 24% from 6th April 2024. No change to lower rate of 18%. Aim is to stimulate the property market for disposals of Buy To Let, Second Homes and similar – it does not change the tax exemption on only/main residence.
- Per previously announced, reduction in CGT Annual Allowance for individuals to £3,000 from 6th April 2024.
- No IHT changes
Business Rates
- Minor Anti Avoidance measures around empty properties.
Duties – Alcohol, Tobacco, Fuel, Air Travel
- Fuel Duties frozen for 12 months including the 5p per litre temporary cut from Spring 2022.
- Alcohol duties frozen
- Duty on vapes to be introduced from October 2026
- Air Passenger Duty frozen for economy flights
- Increase in tobacco duties.
Stamp Duty / SDLT
- Multiple Dwellings Relief to be abolished – this provided an alternative Stamp Duty Calculation when multiple properties were purchased in one go, eg by an investor. It is to be abolished from 1st June 2024.
- No other significant Stamp Duty changes.
Spending and Economic Development
- Consultation on an Accelerated Planning System for major commercial applications, and streamlining householder applications.
- Consultation on an additional £5k ISA allowance for investing in the UK.
- “Public Sector Productivity Programme” £3.4bn investment to save £35bn in productivity via digital transformation and AI.
Whitefield’s View
The reduction in NI was widely touted over the last few days. The impact of freezing both Income Tax and NI thresholds / personal allowance, so called “fiscal drag” will counter a lot of the benefit from this.
It is disappointing that Employers NI is unchanged; 13.8% is a big add on cost to employment.
The removal of the Furnished holiday Lettings regime will probably impact few people other than professional Air BnB landlords. It is unclear what mischief this change is intending to address; indeed in areas like the Isle of Wight, with the move away from “bucket and spade” holidays to shorter breaks and flexible holidaying, this seems a detriment to investment and regeneration. The argument will of course be “local houses for local people” but it’s a conflation of issues.
The removal of Non Dom rules is totemic, but probably not as significant as thought. Non Doms, for the most part, are not avoiding tax altogether, merely paying it in another country, so this brings taxing into the UK. However it remains to be seen how many Non Doms accede to this, or simply move capital and / or residence. It’s interesting that there is a one year lead in to this, cynically enough