2024 Spring Budget Updates

Updated on: Mar 13, 2024

Today the Spring Budget 2024 speech was delivered by Chancellor Jeremy Hunt. Here we delve into the heart of the 2024 Spring Budget and what it means for you. As professionals navigating the complexities of the UK tax system, staying informed on governmental updates is important for optimizing your financial strategies and ensuring compliance. The recent budget announcement brought with it a raft of changes, touching on everything from Capital Gains Tax to the taxation landscape for non-domiciled residents in the UK.

We’ll break down these changes in a clear, concise manner, providing insights into how they might affect your financial planning and business operations. Whether you’re a sole trader, a contractor operating through a limited company, or an individual with varied domestic and international interests, this budget has something for everyone.

Capital Gains Tax Changes

Regarding the planned changes to Capital Gains Tax, there’s an important update that will benefit property investors. From 6 April 2024, the higher rate of Capital Gains Tax on property sales (excluding your primary residence) will be reduced from 28% to 24%. This adjustment means that when selling a property, the tax burden on the profit made from the sale will be lessened, allowing investors to retain a greater portion of their gains. This change could have notable implications for your investment strategy moving forward.

Non-Dom Tax Changes

The latest budget has introduced several significant changes to the taxation of non-domiciled individuals (non-doms) in the UK. These adjustments aim to both simplify the tax regime and enhance the UK’s appeal as a destination for international talent. Here are the key points:

1. Transitional Arrangements: For existing non-doms currently using the remittance basis of taxation, there’s an opportunity for a one-time revaluation of capital assets to their market value as of 5 April 2019. Furthermore, there will be a temporary 50% reduction in the tax rate for foreign income for the first year under the new system (2025-26), easing the transition.
2. Temporary Repatriation Facility: Starting before 6 April 2025, a two-year window will open allowing non-doms to bring overseas income and gains to the UK at a reduced tax rate of 12%. This initiative is designed to encourage the repatriation of gains, with the government anticipating an additional £15 billion of foreign income and gains returning to the UK.
3. New Regime from April 2025: A pivotal change is the introduction of a new residence-based tax regime from 6 April 2025. This will exempt individuals from tax on foreign income and gains for their first four years of UK tax residency, provided they haven’t been UK tax residents in the preceding ten years. Additionally, eligible non-doms can benefit from Overseas Workday Relief (OWR) for the first three years, pertaining to foreign employment income.
4. Looking Ahead – Inheritance Tax (IHT): The government also plans to transition IHT to a residence-based regime. Details of this change will be shaped through consultation and are aimed to be implemented no earlier than 6 April 2025.

These changes signal a recalibration of the UK’s approach to taxing non-doms, seeking to balance fairness in the tax system with maintaining the UK’s attractiveness as a global hub for talent and investment.

PAYE Umbrella company updates

There is a clear commitment toward tackling non-compliance within the Umbrella Company market. The government highlights its dedication to protecting workers employed by umbrella companies, ensuring fair and genuine competition in the market and preventing significant losses to the Exchequer caused by tax non-compliance.

To address these concerns, the government has proposed the following measures:

• Update on Recent Consultation: An update regarding the recent consultation on tackling non-compliance in the umbrella company market is set to be provided at Tax Administration and Maintenance Day.
• New Guidance: In the summer of 2024, the government will also publish new guidance designed to support workers and other businesses that utilize umbrella companies.

National Insurance Contributions changes

The changes to National Insurance Contributions (NICs) announced in the 2024 Spring Budget include:

1. For Employed Individuals: The main rate of employee National Insurance will decrease by 2p from 10% to 8%, effective from 6 April 2024. This is in addition to a 2p cut previously announced at the Autumn Statement 2023, culminating in a significant saving for the average worker earning £35,400 — over £900 a year.
2. For Self-Employed Individuals: A further reduction of 2p from the main rate of self-employed National Insurance on top of a 1p cut announced at the Autumn Statement 2023. From 6 April 2024, the main rate of Class 4 NICs for the self-employed will be decreased from 9% to 6%, and the requirement to pay Class 2 NICs will be abolished. This adjustment is set to save an average self-employed person earning £28,000 around £650 a year.

These reductions signify a significant shift, aiming to alleviate the tax burden on both employed and self-employed individuals. The government notes that, with these changes, a person on the average wage will now experience the lowest effective personal tax rate since 1975.

VAT Registration Threshold change

The changes to VAT registration announced in the 2024 Spring Budget are as follows:

• VAT Registration Threshold Increase: The VAT registration threshold will be raised from £85,000 to £90,000.
• VAT Deregistration Threshold Increase: Concurrently, the deregistration threshold will increase from £83,000 to £88,000.

High Income Child Benefit Charge​

The High Income Child Benefit Charge (HICBC) is undergoing significant changes as outlined in the 2024 Spring Budget. Here’s a summary of these changes and their impact:

• The primary goal of these changes is to address the fairness of the HICBC system. Under the current system, a disparity arises where a household with two earners each making £49,000 a year retains their full Child Benefit, whereas a household with a single earner making over £50,000 experiences a reduction, or complete withdrawal, of the benefit.
• Recognizing this issue, the government has committed to transitioning the system to be based on household income, rather than individual income, by April 2026. This change aims to create a more equitable assessment of eligibility for Child Benefit. The government plans to consult on this transition to ensure it’s implemented effectively.
• In the meantime, as an immediate measure to support working families, the government will increase the threshold for the High Income Child Benefit Charge to £60,000 starting in April 2024. This adjustment will exempt 170,000 families from the charge.
• Additionally, the rate of the charge will be halved. This means that Child Benefit won’t be fully repaid until an individual’s income reaches £80,000. As a result, nearly half a million families are expected to benefit, with an average gain of £1,260 in the fiscal year 2024-25.

These changes reflect the government’s effort to make the High Income Child Benefit Charge fairer and to alleviate the tax burden on families, encouraging a more balanced and equitable approach to supporting children across the UK.

Furnished Holiday Lettings (FHL) Changes

The rules around Furnished Holiday Lettings (FHL) have been a unique part of the UK’s tax landscape, offering specific tax advantages to landlords of short-term furnished holiday properties. However, changes announced in the 2024 Spring Budget signal a significant turn:

• Abolition of the Furnished Holiday Lettings Tax Regime: The government has announced the complete abolition of the FHL tax regime. This change effectively eliminates the tax advantage that landlords of short-term furnished holiday lets previously enjoyed over landlords who let residential properties to longer-term tenants.
• Effective Date: This major change will take effect from 6 April 2025. The government will publish draft legislation in due course to formalize this transition.

This move is designed to level the playing field between different types of property rentals, ensuring a more balanced approach to taxation within the property letting industry.

Tax Agents and intermediaries

The changes announced for Tax Agents and intermediaries in the 2024 Spring Budget focus on elevating standards within the tax advice market and streamlining the registration process:

1. Strengthening the Regulatory Framework: The government is publishing a consultation on options to enhance the regulatory framework governing the tax advice market. This move indicates a push towards higher professionalism and accountability in tax advisory services, aiming to protect businesses and individuals from substandard advice.
2. Requirement for Registration with HMRC: A significant change under consideration is requiring tax advisers to register with HMRC if they wish to interact with the agency on behalf of their clients. This requirement would formalize the relationship between tax agents and HMRC, ensuring a minimum standard of knowledge and integrity.
3. Streamlining the Registration Process: Alongside tightening the regulatory standards, the government aims to make it quicker and easier for tax advisers to register with HMRC. This initiative seeks to remove potential barriers to compliance, facilitating a smoother and more straightforward registration process for tax professionals.

These initiatives reflect the government’s commitment to improving the quality and reliability of tax advice, ensuring tax compliance, and enhancing the overall efficiency of the tax system by working closely with tax advisers and intermediaries.

IR35 and off-payroll working updates

In our review of the latest budget announcement, it’s noteworthy to mention that there were no specific changes or updates related to IR35 and off-payroll working rules. This means that the current regulations and guidelines remain in effect without alteration.

It’s a Wrap

In summary, the 2024 Spring Budget introduces several impactful changes for UK taxpayers, specifically addressing Capital Gains Tax, National Insurance Contributions, VAT registration thresholds, and more. While there were no updates to IR35 and off-payroll working rules, we know that a number of our clients will be deeply interested in the non-dom tax changes that were announced.

If you have any questions about this changes, or are wanting some advice, please feel free to get in touch.