Spring Budget at a glance… - Boodle Hatfield

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06 Mar 2024

Spring Budget at a glance…

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Andrew Loan View profile
4 min read

A few weeks ago I provided some speculation (here) on what might be on the horizon in the 2024 Spring Budget. The Chancellor’s speech today was unashamedly political, setting the scene for a general election that will come by January 2025 at the latest.  

It will take some time to work through the details released after the speech, but here are some features that caught my eye.  A number of the announced changes will only come into effect in 2025 or 2026, which is after the next general election, and probably after another budget or two, so are really a problem for tomorrow.  Few tax changes are as “permanent” as the Chancellor suggested, particularly when their implementation is deferred, and even more so if another party may be in power.

Although flagged repeatedly as a tax cutting budget, the speech include several taxes that were either increased or maintained at their existing levels: 

  • Rather than cutting, excise duties on hydrocarbon oil and alcohol will be maintained at their current rates until 2025.  The former entails a further extension of the 5p cut in fuel duties announced in 2022 and extended in 2023.  In the face of ever increasing concern about climate change, most fuel duties have not increased since 2011, and it feels that the temporary 5p reduction may be hard to take away, just as the fuel duty escalator was been abandoned.  
  • There will be a new excise tax on vaping products from October 2026, alongside an increase in tobacco duty at the same time. 
  • The special income tax and capital gains tax (CGT) regime for furnished holiday lettings (FHL)  – with the rentals treated as trading income, and the assets benefiting from CGT business asset disposal relief – will be abolished with effect from 6 April 2025.  
  • The SDLT multiple dwellings relief (MDR) will be  abolished with effect from 1 June 2024.  The lower SDLT rates for non-residential property will continue to apply to “mixed” transactions which contain both residential and non-residential elements.  The change is subject to transitional rules: MDR will apply to transactions completed or substantially performed before 1 June 2024, and to transactions contracted on or before 6 March (i.e. today) but completed on or after 1 June, as long as the contract is not varied after 6 March.  

But there were some actual tax cuts, taking effect before the election:

  • The higher 28% rate of CGT on sales of residential properties will be cut to 24% from 6 April 2024.  Other rates of CGT will remain the same, including the lower rate of CGT on residential property which remains at 18%, the 18% and 28% rates for carried interest, and the main 10% and 20% rates, substantially below the equivalent rates of income tax. 
  • For people who are employed or self-employed, the main rates of national insurance contributions (NICs) will be cut by a further 2 percentage points from 6 April 2024, to 8% for employees and 6% for the self-employed.  This extends the cuts from 12% and 9% respectively made in the 2023 Autumn Statement.  The 2% higher rates, and the 13.8% rate paid by employers, will remain the same.  Income tax rates are not changing.  
  • The value added tax (VAT) threshold has been frozen at £85,000 since 2017, and in 2022 it was announced that the threshold would remain frozen to 2026.  However, the Chancellor announced today that the threshold will be increased to £90,000 from 1 April 2024.  The cliff-edge nature of VAT registration still presents a barrier to the growth of businesses.  
  • The pernicious high income child benefit charge (HICBC) – which claws back child benefit from those earnings over £50,000, and can result in some eye-wateringly high marginal income tax rates for families with several children, over 100% in some cases – will be addressed by 2026.  In the short term, the claw-back threshold will be increased to £60,000 and the rate reduced from £1 per £100 to £1 per £200. 

Last, but by no means least, and in a reversal of Conservative Party policy, the Chancellor in broad terms adopting the Labour Party’s proposals to reform the taxation of individuals who are resident for tax purposes in the UK but domiciled outside the UK (“non-doms”).  

The “non-dom” tax regime will be abolished and replaced by a residence-based regime from April 2025.  The remittance basis of taxation for non-UK income and gains will be replaced by an exemption for foreign income and gains for the first four years.  There is a technical note on non-dom taxation that will need digesting, and many affected taxpayers may want to reconsider their plans well before the changes come into effect in April 2025.  There is also a suggestion that inheritance tax might move to a long-term (10 year plus) residence basis rather than domicile (or deemed domicile after 15 years), but there is a general election before any of that will be implemented.  

This summary is intended to provide a first point of reference for current developments in aspects of the law. It should not be relied on as a substitute for professional advice.

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