Top implications for businesses and individuals – Spring budget 2024

The Chancellor has delivered his last Spring Budget prior to the election. This was badged by the Chancellor as a ‘Budget for Long Term Growth’. Whether he is around to see if there is any long term growth will depend on whether the electorate believe this to be the case!

It was quite a long Budget speech compared to previous years (66 minutes) but when we come to specifics, there wasn’t that much meat on the long term growth bones. The majority of his speech seemed to be name checks for fellow Conservative MPs.

As always, the major tax announcements came towards the end but given the accurate pre-Budget leaks, there were no rabbits out of the hat. We had seen the rabbits on a loop on social media for many days before.

The lifting of the High-Income Child Benefit Charge threshold and widening of the taper reduction, prior to fundamental changes in future years is very welcome. We also talk in more detail about the national insurance changes below.

There are some property tax changes, which will impact those who rent out furnished holiday homes and those who acquire portfolios of properties or properties with annexes, and those selling residential properties.

The most fundamental change is in the taxation of ‘non-doms’. The level of detail in the Budget announcement suggests that the Treasury has been working on this for some time. Even so, there are still some significant questions on the impact of the regime. Based on the press release there is still planning for some of those who may be affected prior to 5th April 2025.

Top implications for individuals

Taxation of non-domiciled individuals

Today’s Budget announced wholesale changes to the rules applicable to ‘non-domiciled’ individuals – those who are UK resident but do not consider the UK to be their permanent home. The changes will affect the tax treatment of non-UK income and gains by abolishing the remittance basis, changes in the tax treatment of income and gains from non-UK trusts, and consultation on the future of inheritance tax to move to a residence-based system.

Read more here.

Property tax changes

The Chancellor announced a number of changes to property taxation, including reducing the rate of Capital Gains Tax on residential property disposals from 28% to 24% and abolishing both the favourable tax treatments available on qualifying Furnished Holiday Lets and Stamp Duty Land Tax Multiple Dwellings Relief. There were also changes announced to extend Agricultural Property Relief to land which is managed under an environmental agreement.

Read more here.

National Insurance reduction

We previously summarised the changes introduced to National Insurance Contributions (NIC) in the 2023 Autumn Statement. Broadly this was the abolition of Class 2 NIC and reduction of Class 4 NIC from 9% to 8% for self-employed individuals and Class 1 Employee NIC from 12% to 10%.

In today’s Budget, the Chancellor announced further 2% reductions in both Class 1 and Class 4 NIC, reducing the rates to 8% and 6% respectively. The reductions will apply from 6 April 2024 for the new 2024/25 tax year. As before, the employer NIC rate remains unchanged at 13.8%.

As the reductions are only applicable to earnings between £12,570 and £50,270 per annum, it will mean a saving of up to £754 for individuals per annum, or around £63 per month. Together with the earlier reductions, it means up to an additional £1,508 and £1,131 per year in take-home income for individuals.

When thinking about profit extraction from companies, this change will make salary extraction a more palatable option, albeit to be considered based on the specific facts and circumstances of each individual taxpayer.

High Income Child Benefit Charge

Currently the Child Benefit starts to be withdrawn where one individual in a household has total income of more than £50,000, and is fully withdrawn where income is over £60,000.

There is due to be a wholesale reform of the High Income Child Benefit Charge in the future in recognition of the fact that the current rules can create some unfair results where a household that has one higher earner earning £60,000 would have the Child Benefit fully withdrawn, whereas a household with two people earning £50,000 each would not be subject to a reduction.

With effect from 6 April 2024, as a temporary measure until the new rules are introduced, the thresholds will increase to £60,000 and £80,000 respectively. This change will affect around half a million working families.

Top implications for businesses

Increase in the VAT registration threshold

In perhaps a surprising move, the Chancellor has increased the VAT registration threshold to £90,000 from £85,000, a threshold which has been in place since 2017. The deregistration limit has increased in line with this to £88,000 from £83,000. This change in the threshold will apply from 1 April 2024. It is estimated that this will mean that 28,000 businesses will benefit from no longer being required to be VAT registered.

Creative industries

The Chancellor announced measures to provide additional support to creative industries, commenting ‘we have become Europe’s largest film and TV production centre’. The reliefs will generally result in additional tax credits for independent filmmakers who can claim the Audio-Visual Expenditure Credit.

Theatre, orchestra, museum and galleries tax reliefs will be permanently set at 40% or 45% for touring productions from 1 April 2025.

Read more here.

Extension of full expensing to leasing assets

The biggest potential change which may be introduced in future years is the full expensing for leasing. This sounds niche but has the prospect of changing the dynamic for financing of businesses. If funders can write off the cost immediately for providing assets to businesses, this could provide an almost complete tax shelter for most banks’ profits. This could encourage banks to provide much more capital at lower rates for businesses to improve their operations. This is just a consultation for now.

This was a Budget with few announcements affecting most businesses, but its impact will be felt by individuals and residential property investors.

Whilst the reductions in national insurance and the changes to the High Income Child Benefit Charge are to be welcomed, they are unlikely to have a significant impact on people’s living standards, except for those with children and income of between £50,000-£60,000. These will partially offset the impact of the tax allowances and thresholds that have now been frozen for 4 years.

The changes that are likely to have the most significant impact, albeit for a relatively small group of people, are the non-dom changes.

Daniel Grainge, Head of Tax, commented “Individuals who are non-UK domiciled and have non-UK assets or income, including offshore trust structures, should seek advice to ensure that they understand the implications of the changes, and consider if there are any steps they should take before the new rules come into effect.”

Watch our Spring Budget question time webinar

Following the Spring Budget, our panel of specialists examined the announcements made by The Chancellor, discussing what these changes mean for you. They also answered questions from our live audience. This webinar is now available to watch on demand here.

Alternatively, if you would like any further information or guidance on this topic, get in touch with your usual Kreston Reeves contact or contact us here.