Spring Budget 2024 Tax update

On March 6, 2024, Chancellor Jeremy Hunt shared the Spring Budget. Before the budget announcement, there was a lot of talk about the Chancellor possibly lowering personal taxes, like income tax or National Insurance contributions (NICs). As expected, Chancellor Hunt did reduce NICs, starting from April 6, 2024.

There were also predictions that the Chancellor might change a significant tax policy from the Labour Party, specifically the removal of non-domiciled status for certain foreign individuals. Today, Chancellor Hunt confirmed those predictions by saying they will replace the current “non-dom” system with a new one based on residence.

Below is a summary of the key measures:

The VAT Registration Threshold Raised

The threshold for VAT registration is set to rise from £85,000 to £90,000, and the VAT de-registration threshold will also see an increase from £83,000 to £88,000. These adjustments will come into effect starting April 1, 2024.

New British ISA announced

In an effort to revitalise London as a preferred location for companies to go public, the government has introduced a UK ISA to incentivise individuals to invest in UK equities. This will provide an extra allowance of £5,000 in addition to the existing ISA allowance.

Business Tax

The Chancellor announced that the benefit of full expensing will extend to leased assets in the near future. We will provide updates once a specific date for this modification is confirmed. Additionally, an extra £200 million in funding has been allocated to the post-pandemic Recovery Loan Scheme, aiming to assist up to 11,000 small businesses in securing the necessary financial support. This scheme will be renamed the Growth Guarantee Scheme.

Oil and gas

The tax rates for oil and gas companies remain unchanged. Nevertheless, there is an extension of the energy profits levy (EPL), which imposes a 35% tax on the profits of these companies. The previously set “sunset” date for this levy will now be March 2029. As already declared, the government affirmed that the EPL will be deactivated sooner through the Energy Security Investment Mechanism if prices dip below specific thresholds. This mechanism will be formalized through legislation in the forthcoming Spring Finance Bill.

National Insurance contributions

Expanding on the reductions outlined in the Autumn Statement 2023, the government has introduced additional cuts to the primary rates of National Insurance Contributions (NICs) for both employees and the self-employed. The Chancellor revealed today that: (i) the main rate of Class 1 employee NICs will decrease from 10% to 8%; and (ii) the main rate of Class 4 self-employed NICs will undergo an additional 2% reduction on top of the previously mentioned 1% – specifically, decreasing from 9% to 6%. These adjustments will come into effect starting April 6, 2024. Additionally, the government announced plans to initiate a consultation later this year to fulfil its commitment, as outlined in the Autumn Statement 2023, to completely eliminate Class 2 NICs for the self-employed.

Non-domicile regime

The government has declared the elimination of the remittance basis of taxation for individuals not domiciled in the UK (“non-doms”). The current system will be substituted with a residence-based framework starting April 6, 2025. Under this new structure, individuals residing in the UK for more than four years will be subject to UK tax on their foreign income and gains, regardless of whether they are brought into the UK. Existing non-doms will have transitional provisions, including: (i) an option to adjust the value of capital assets to April 5, 2019; (ii) a temporary 50% exemption for taxing foreign income in the first year of the new system; and (iii) a two-year Temporary Repatriation Facility allowing the transfer of previously earned foreign income and gains to the UK at a 12% tax rate.

Multiple Dwellings Relief (MDR)

Starting from June 1, 2024, the government will eliminate MDR (Multiple Dwellings Relief), a bulk purchase relief within the Stamp Duty Land Tax system that is applicable when a transaction involves buying interests in multiple dwellings. MDR will continue to be relevant to transactions where contracts are exchanged on or before March 6, 2024 (irrespective of the completion date), as well as to transactions completed before June 1, 2024.

Furnished holiday lettings (FHL) regime

From April 6, 2025, the government intends to do away with the Furnished Holiday Lettings (FHL) regime, removing the tax benefit for landlords renting out short-term furnished holiday properties. This move aims to create a more equitable environment between short-term and long-term rentals. Draft legislation, which will incorporate an anti-forestalling rule starting from March 6, 2024, will be released in due course.

Capital gains tax (CGT)

The government has declared a reduction in the higher rate of Capital Gains Tax (CGT) on gains from residential property, lowering it from 28% to 24%, starting April 6, 2024. It’s important to note that this change doesn’t impact the sale of main residences, as Private Residence Relief will still be applicable in such cases.

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