Spring Budget 2024 – Summary of Key Changes

Spring Budget 2024: Impact on Businesses

VAT Registration Threshold Increase

For the first time in seven years, the government will increase the VAT registration threshold to ease the burden on small businesses. From the 1st of April 2024, the threshold will increase from £85,000 to £90,000, with the deregistration range increasing from £83,000 to £88,000. It is estimated that 28,000 businesses will benefit from no longer being VAT registered in the 2024-25 tax year.

Creative Industries Tax Relief

From April 2024, a new Independent Film Tax Credit (IFTC) will be introduced under the Visual Expenditure Credit (AVEC) provisions. Films with budgets under £15 million will receive a 53% tax credit for qualifying film expenditure under the IFTC proposed tax changes. This qualifying film expenditure is capped at 80% of core expenditure, resulting in a credit worth up to £6.36 million.

It was proposed that the visual effect costs for film and high-end TV will receive an increase to 39% in April 2025 from the previous 34% set out in the Autumn Statement 2023. In addition, the stated 80% qualifying cap on expenditure will be removed with a 40% business rate cut earmarked for eligible film studios in England until 2034.

Effective from 1 April 2025, the government will permanently set the rates for Theatre Tax Relief, Orchestra Tax Relief and Museums and Exhibitions Tax Relief at 40% and 45%. This solidifies the previously announced temporary rates and provides long-term support for cultural sectors.

Pension funds

The Spring Budget 2024 presented no significant surprises to the pension system. The government will continue supporting the State Pension Tripe Lock, ensuring the state pension retains value over time.

Defined Contribution (DC) pension schemes will be required to announce the amount of capital invested in UK equities so that the government can further understand the allocation level in UK stocks.

The government will continue exploring a lifetime provider model for DC Pension Schemes. This follows an announcement in the Autumn Statement 2023, in which the government considered whether savers should have the right to request a new employee to pay into an existing pension pot.

Energy Profits Levy

The chancellor extended the Energy Profits Levy (EPL), known as the windfall tax, to 31st March 2029 on all UK Oil and Gas profits. The 35% rate was initially extended by three years in the Autumn Statement 2023 but will not apply if prices per barrel of oil fall below $71.40 and £0.54 per Therm for gas over two successive quarters.

Capital Allowances

As previously announced in the Autumn Statement 2023, a total rate of expensing was implemented on expenditures such as construction and fixtures, with 50% first-year allowances for unique rate assets being made permanent.

The government announced that they would publish a technical consolation to explore extending these allowances to incorporate plant and machinery leasing when fiscal conditions allow.

Spring Budget 2024: Impact On Individuals

National Insurance Contributions

Starting from the 6th of April 2024, employees will see a 2% cut to their National Insurance rates. Anyone earning between £12,570 and £50,270 will see a drop from 10% to 8%. The average UK worker earning £35,400 will save approximately £448 annually, with a maximum saving of £754 for top-rate taxpayers.

This new cut follows on from a previous rate cut of 2% made in the Autumn Statement, effective January 2024, which saw the national insurance rate fall from 12% to 10%.

The chancellor confirmed that self-employed workers will see the rate of class 4 NIC that they pay on annual profits between £12,570 and £50,270 drop from 9% to 6%. This rate was originally due to be reduced to 8% effective from 6th April 2024, but the additional 2% reduction will welcome financial uplift to self-employed workers for the new tax year.

When combined with the abolition of mandatory class 2 contributions announced in the Autumn Statement, the average self-employed individual earning £28,000 will save an average of £650 annually. Individuals who earn above the £50,270 threshold will see additional profits tax at the current 2% rate.

Despite the chancellor’s new rate cuts, some employees in practice will still pay higher amounts of tax and National Insurance. This is a result of overall tax threshold freezes implemented in the Autumn Statement 2022, preventing personal tax bands from rising with the consumer price index.

Child Benefit

Parents will receive the following rates for Child Benefit from April 2024: £25.60 a week (£1,331 a year) for their eldest child and £16.95 a week (£881 a year) for any additional children.

From April 2024, the threshold for Higher Income Child Benefit Charge (HICBC) will be increased to £60,000 from the previous £50,000 threshold with an extended tapper, meaning Child Benefit will only be fully repayable once your income is over £80,000.

The chancellor further announced that the clawback system will be moved to a total household income basis from April 2025; however, this will require significant changes to HMRC systems to be implemented.

Capital Gains Tax

From April 2024, a reduction in the high rate of Capital Gains Tax will see chargeable gains (that exceed the unused basic rate band of 18%) now incur a lower rate of 24% compared to the previous 28%. This rate only includes gains not qualifying for private residence relief, typically associated with the sale of non-main residence properties.

Non-domiciled Tax Regime

The government will abolish the current remittance basis of taxation for non-UK domiciled individuals from April 2025, introducing a residence-based regime. Under this new regime, new arrivals to the UK will not be required to pay any UK tax on foreign income and gains for their first four years of residency here. Those individuals who continue to reside in the UK after four years must pay the same tax rate as other UK residents.

Individuals currently classed as non-doms will be placed on a transitional arrangement. This will include a Temporary Repatriation Facility to enable previously accrued foreign income and gains to be taxed at 12%.

The chancellor further announced reforms to the OWR (Overseas Workday Relief) to ensure eligibility with the new residency-based regime. This will see the OWR continuing to provide income tax relief on earnings carried out on overseas duties for the first three years of tax residency, with any restrictions on these removed.

Inheritance Tax

The Spring Budget brings a new focus on the future of Inheritance Tax (IHT), with a proposed shift from the current domicile-based system to one that centres on residency. The government plans to launch a consultation to discuss these changes in detail with legislation to follow later this year.

From April 2025, UK assets are set to fall under the IHT umbrella, no matter where the owner lives. Additionally, after a decade of living in the UK, non-UK assets will also be liable for IHT.

However, there’s a silver lining for non-UK domiciled individuals who’ve set up trusts with non-UK assets before April 2025, as these will likely not be touched by the new IHT rules.

Furnished Holiday Lettings

The government will abolish the Furnished Holding Lettings (FHLs) tax regime in April 2025. This move aligns FHL properties with the tax treatment of other residential properties for Income Tax, Capital Gains Tax and Inheritance Tax.

With the regime’s abolition, these properties will be classified as property investment businesses. For landlords of FHL properties, this means a transition away from certain tax advantages.

UK Individual Savings Accounts (ISA) and British Savings Bonds

A new UK ISA with an additional allowance of £5,000 has been introduced to increase earnings and support investment in UK assets. This is on top of the existing £20,000 limit that can be spread across various ISA products.

National Savings and Investments (NS&I) will introduce British Savings Bonds from April 2024. This will offer a secure investment with a fixed interest rate for three years.

Stamp Duty Land Tax (STLT) Multiple Dwellings Relief

From 1st June 2024, the government aims to abolish the Multiple Dwelling Relief Scheme (MDR), which enables bulk purchase relief in Stamp Duty Land Tax. The MDR allows the purchaser to calculate tax based on the average value of the dwelling purchased instead of their values.

Any contracts exchanged on or before 6th March 2024 will still be able to take advantage of MDR allowances even if the purchase is completed after 1st June 2024.

Transfer of Assets Abroad

The government has announced changes in legislation to the Transfer of Assets Abroad regime (ToAA) anti-avoidance rules. From 6th April 2024, legislation will prevent individuals from using companies to bypass current anti-avoidance legislation to reduce UK income tax liabilities.

These changes to the ToAA follow a Supreme Court decision in 2023 (HMRC v Fisher UKSC 44), in which a business transfer from Gibraltar to the UK did not fall within the current scope of ToAA rules.

Conclusion

With the government earmarking a general election later this year, we await to see whether further regulatory and tax changes will be made before the end of the year. Overall, the Spring Budget 2024 will provide minor tax relief to individuals and businesses.

If you want to learn more about these changes and how they might impact you or your business, please get in touch with our expert team.