The Chancellor’s Spring Budget 2024 was expected to be one of the most political Budgets of recent times – and it didn’t disappoint. This is, after all, the final chance for the Government to show the voting public what tax could look like under a continuing Conservative Government. Whatever happens, no one really expects this to be the final Budget of 2024, and so the announcements made today may or may not have a long shelf life. But until we know different, it is important to understand what the announcements mean for taxpayers.
Ahead of Gravita’s considered analysis, which will be available in the coming days, we are pleased to share our edited highlights of what we know so far and what this could mean for you:
Individuals
- Reduction in National Insurance:
- This was leaked ahead of the actual announcement as a headline grabber. The 2% reduction for both employees and the self-employed from April 2024 will lead to a maximum annual saving of a little over £750 – and combined with the reduction in the 2023 Autumn Statement brings the total maximum annual saving to around £1,500. The Chancellor appears to have also promised to continue to reduce NIC, but only when the country can afford to do it.
- Reform of Non-Dom Rules: Rather than abolish the Non-Dom Rules, these will be reformed and will be replaced with a simpler system from April 2025. Based on what we know so far, this may work very well for short-term visitors. The legislation has not yet been released but there are a few key points that give us a view of what the rules will look like:
- For the first 4 years of UK tax residency, Arrivers, (or for those arriving after at least 10 consecutive years of non-residence), will not suffer UK income tax or UK CGT on their overseas income and gains, whether this is remitted or not. Those who are already UK tax resident, but who have been here for less than 4 years will be able to take advantage of the same rules until the end of their 4th year of residence.
- After 4 years, those who remain in the UK will pay tax on their worldwide income and gains, in the same way as anyone who is living here.
- Residency will be determined using the Statutory Residency Test, as it has been since 2013, but Treaty Non-Residence and Split Year treatment look set to be ignored when calculating the 4 years.
- Transitional Rules are set to be introduced which may encourage Non-Doms currently living in the UK to remit overseas money to the UK. This will include a reduction in the amount of foreign income subject to tax in 2025-26, as well as a rebasing of the value of capital assets to 2019 values for CGT purposes, when sold post April 2025. This will only apply to those who have previously claimed the remittance basis.
- Non-Doms who have used the remittance basis in the past will be able to remit pre-April 2025 income and gains at a temporary rate of 12% during 2025-26 and 2026-27.
- There are significant changes to the tax rules governing non-UK trusts, which include the abolition of the concept of a protected trust from April 2025.
- Finally, there will be changes to the IHT regime around Non-Doms and non resident trusts. The Government will consult on these changes later this year.
- Child Benefit Taper Threshold to increase:
- As part of a move to improve the fairness of how Child Benefits are reduced for higher earners, which currently hinge on the income of one parent rather than both, as a transitional step, the threshold will be increased to £60,000, with tapering being spread over the next £20,000, rather than this happening at £50,000 and being spread over £10,000. Long term, the Chancellor is proposing to look at household income, rather than just the highest earner. Whilst no doubt fairer, administering this could be significantly more complicated.
Property
- Scrapping of the Furnished Holiday Lets Regime:
- Currently, property let on a short-term basis which meets particular conditions have the benefit of various tax reliefs, most notably full tax relief on the cost of mortgage interest and the availability of capital allowances. The Chancellor feels that this creates a distortion in the tax system and reduces the availability of long-term rental accommodation, and so he has abolished the scheme from 6 April 2025.
- SDLT – Multiple Dwellings Relief to be Abolished:
- Historically, this allowed those purchasing more than one property in a particular transaction to pay a lower rate of SDLT. This will be abolished from 1 June 2024.
- Top rate of Capital Gains Tax for Residential Property to be reduced:
- Currently, UK residential property which does not qualify for full Principal Private Residence (PPR) relief upon sale is subject to 28%. This will be reduced to 24% from 6 April 2024.
Businesses
- Increase in the Threshold for VAT registration:
- From 1 April 2024, the threshold for businesses needing to register for VAT will increase to £90,000 from £85,000 in a measure designed to boost growth and support smaller businesses.
IHT and Trusts
- No Change to IHT rates or thresholds:
- Notably, this was again absent from the Chancellor’s speech in relation to most people.
- Plans to move towards a regime that is based on the tax residence of a person and not their domicile.
Other Goodies
- Alcohol Duty Frozen:
- Alcohol Duty was due to be increased by 3% this year, but the freeze on increases has been extended to February 2025, with the aim of encouraging us to continue to make use of our local pub. Hint taken.
- British ISA to be launched:
- In a bid to encourage more British investment, the Government will consult on giving British investors the opportunity to invest an additional £5,000, tax free, via a new British ISA. This will be on top of the usual annual £20,000 investment, which will not change.
What next?
This is just a snapshot of what we know so far and no doubt there will be more to come once we have considered the detail, if you have any questions, please don’t hesitate to contact a member of the team at hello@gravita.com.
Gravita’s full analysis of the detailed announcements will be released over the coming days, watch this space!
