Spring Budget rings the changes

The 2024 Spring Budget followed a recent trend where most of the headline announcements had been correctly discussed in the media ahead of the day. As well as the usual spending review, there were a number of tax measures announced that will affect individual taxpayers.

Employees and self-employed people

The expected 2% cut in the main rates of primary Class 1 and Class 4 NI was confirmed. From 6 April 2024, the rates will be as follows:

There are no changes to the rate or threshold applicable to employers.

Child benefit

The way that the high-income child benefit charge (HICBC) operates has long been criticised, in particular the discrepancy that means that a family where each parent earns, say, just under the £50,000 withdrawal threshold can keep the full amount, but a single income household will lose the benefit if they earn more than £60,000.

The long-term solution will be to assess eligibility based on household income, but this will not be possible immediately. In the meantime, from 2024 the withdrawal threshold will be increased to £60,000, and the rate of charge will be lower – at 1% for every £200 of excess income. This means that full withdrawal won’t occur until adjusted net income is at £80,000.

Capital gains tax (CGT)

The current CGT rates applicable to gains made on disposals of residential property are 18% and 28%, depending on the individual’s level of income and the size of the gain. This compares to rates of 10% and 20% for other assets, e.g. listed shares. From 6 April 2024, the higher rate will be cut to 24%.

Note. The 18%/28% rates also apply to carried interest gains. Such gains will continue to be subject to these rates.

Furnished Holiday Lets (FHLs)

The FHL rules treat short-term letting businesses in a similar way to trading businesses for the purposes of various tax reliefs (including business asset disposal relief), subject to availability and occupancy conditions being met.

The FHL regime will be abolished from April 2025. Targeted rules will apply from 6 March 2024 to prevent a CGT advantage being gained via the use of unconditional contracts.

Stamp Duty Land Tax

Multiple dwellings relief will be abolished for transfers with an effective date falling on or after 1 June 2024. However, transfers where contracts have been exchanged on or before 6 March 2024 can still benefit from relief, subject to a number of conditions. This only applies to properties in England or Northern Ireland, as Scotland and Wales have their own devolved regimes.

Non-domiciled individuals

Individuals that are UK residents but have a non-UK domicile (non-doms) can currently access a remittance basis which excludes foreign income and gains from the UK tax net unless they are remitted to the UK. Domicile is a general law concept. From April 2025, the non-dom status for tax purposes will be abolished. Instead, those arriving in the UK for the first time, or following a ten-year period of non-residence, will have a 4-year foreign income and gains (FIG) regime, meaning they won’t pay UK tax on overseas income or gains for the first four years. The funds can be brought to the UK with no additional charges. After the end of the FIG period, tax will be paid on worldwide income and gains.

It is also intended that inheritance tax (IHT) will move to a residence-based system from April 2025. Details will be available following a consultation.

Other measures

• The VAT registration threshold will increase to £90,000 from 1 April 2024. The deregistration threshold will increase to £88,000.
• A new UK ISA with an allowance of £5,000 per year will be introduced.
• Personal representatives will no longer be required to seek commercial loans to pay IHT before applying for a grant on credit (from 1 April 2024).
• SDLT first time buyers’ relief will be extended to those who purchase new leases under a nominee/bare trust arrangement from 6 March 2024.
• The scope of agricultural property relief and woodlands relief will be restricted to UK property from 6 April 2024.