Budget 2024: Highlights

6 March 2024

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It was always going to be a very odd Budget with a general election looming, and this, of course, cast a huge shadow over the entire Budget. The Chancellor found himself in the unenviable position of being caught between the looming election shadow, a bleak outlook for the Conservative party in terms of polls, a very tight position due to the poor state of public finances and a gloomy growth outlook, and a very high overall effective tax environment. The awkwardness was further magnified, by the ongoing significant divisions of opinion within the Conservative party regarding the preferred direction of tax policy

Arguably, there would have been no tax giveaways if not for the shadow of the general election – but we did have a further national insurance reduction. On the face of it, this looks like a gamble! It was coupled with announcements of a freeze on public spending, and this explained with the aim of the government being to incentivise productivity in the public sector.

This aside, it was, however, probably the most interesting fiscal statement for a number of years from a purely tax perspective, with a few changes that will impact many, particularly in Cornwall.

Interestingly, one significant change was a ‘copy and paste’ exercise from a long held and publicised policy of the opposition.

The headline tax announcements were as follows:

  • 2% NIC rates reduction – on top of the NIC reductions announced in the Autumn Statement, the Chancellor announced a 2% cut in the rate of class 1 employee NIC to reduce this to 8% (from 10%), and a mirrored 2% reduction in the rate of class 4 NIC for the self-employed from 8% to 6%.
    • There are a few things here – I think employer’s would also liked to have seen some assistance, and I think this reduction may be short-lived (my thoughts would be that this would be reversed post the next general election).
  • VAT registration threshold increase – from 1 April 2024 the VAT registration threshold will increase by £5,000 to take it to £90,000 (from £85,000 which hasn’t been increased for 7 years). The deregistration threshold will also increase by £5,000 to £88,0000.
    • Whilst welcome, this is mere tinkering with what many see as a broken model. The “cliff edge” nature of the threshold is a significant issue – the whole concept needs a rethink in my opinion.
  • Increase to High Income Child Benefit Charge (HICBC) threshold – from 6 April 2024 the income threshold per individual (where they or their partner are eligible to claim child benefit) is increased from £50,000 to £60,000. An additional change is that the taper threshold has increased from £60,000 to £80,000 – meaning that the effective tapered loss of the child benefit is increased to being over a £20,000 income band, as opposed to the previous £10,000 band. There were also announcements that the government will consider rectifying the sizeable issue of the income threshold being considered on an individual basis in the future – and a commitment to consider relevant changes in future years.
    • This is all welcome, but in the context of any relaxation of the mess that is the HICBC is welcome. The charge is ridiculous on a number of levels, and is far too complex and administratively burdensome (for taxpayers and HMRC) for what it is. The whole system needs to be looked at.
  • Abolition of the ‘furnished holiday let regime’ – as strongly rumoured/leaked the day before the Budget (but with not nearly enough time for those impacted to consider and implement planning), the furnished holiday let (FHL) regime and associated benefits is/are to be abolished from 6 April 2025, but with anti-forestalling measures applying to disposals (presumably to catch claims for capital gains Business Asset Disposal Relief – the 10% rate) from today.
    • This is a huge blow to furnished holiday let owners. We have limited detail at the moment, but I currently have a number of questions, such as how this impacts FHL owners that have previously made capital allowances claims, and whether changes will impact the VAT position etc.
      • FHL owners will need to consider their position going forwards, asking themselves: whether the continuation of the business is viable, if so, how the business should be structured going forwards etc.
      • FHL owners relying on the profits for ‘relevant earnings’ for pension contribution purposes will also need to reassess their strategy.
      • Draft legislation will be released in due course when we will have more detail and be able to provide a further update.
  • Reduction of higher-rate of capital gains tax on gains on residential property – it was announced that the current higher-rate of capital gains tax of 28% on gains on the disposal of gains realised on residential property, is to be reduced to 24% from 6 April 2024. The lower rate will remain at 18%. The reduction is stated to “generate more transactions in the property market, benefitting those looking to move home or get onto the property ladder.”
    • I’m sceptical as to whether this is enough of an incentivisation. Why only reduce to 24% and retain an odd 4% disparity between the 20% rate for other assets? The additional administration (and associated cost) the different rate causes for HMRC must more significantly counter the slightly higher rate. Surely a more logical step would be to just align the capital gains tax rates for all assets.
    • Those in the middle of a sale process may wish to delay exchange of contracts until the new tax year, albeit consideration needs to be given to the reduced capital gains annual exemption from 6 April 2024 (pre-announced to reduce to £3,000 from the current £6,000).
  • Extension of capital allowances ‘full expensing’ to leased assets – it was announced that the government will consult on a potential extension of full expensing to leased assets, which do not currently qualify. This would be a welcome extension for larger companies and corporate groups.
    • As we have previously advised, full expensing will largely only be useful for those larger companies or groups where the company/group uses its Annual Investment Allowance each year.
  • New UK ISA – a new UK ISA with its own £5,000 allowance was announced, which will form an additional allowance to the existing ISA allowance. The government will consult on the details when presumably, we will receive further information/details. We will update at this point.
  • Non-UK domiciled regime – this is the Chancellor’s “copy and paste” work. The current “remittance basis” regime for income tax and capital gains tax will be abolished in its entirety from 6 April 2025 and a simple system introduced.
    • Interestingly, whilst the above only relates to income tax and capital gains tax, the released documentation states that “The government has also announced an intention to move to a residence-based regime for Inheritance Tax, with plans to publish a policy consultation on these changes, followed by draft legislation for a technical legislation, later in the year” and “The government intends to move IHT to a residence-based system, subject to consultation and applying this only from 6 April 2025.” Changes to the UK inheritance tax position for non-UK domiciled would be sizeable for those impacted. We will update when the consultation document is published, however, we’d suggest those that are relying on their non-UK domiciled status from a UK inheritance tax mitigation perspective should review their position as a matter of urgency.
  • Fuel Duty frozen – current rates are being maintained for a further year – the usual giveaway that isn’t a giveaway!
  • Temporary extension of higher rates of creative tax reliefs made permanent – in Budget 2023 it was announced that the higher-rates of Theatre Tax Relief (TTR), Orchestra Tax Relief (OTR) and Museums and Galleries Exhibitions Tax Relief (MGETR) would be extended for 2 years until 1 April 2025. Rates have now been made permanent (the permanent rates from 1 April 2025 being 5% less than the current temporary rates in general), and the MGETR has now been made permanent (which previously had an expiry date). Pleasing for those creative/culture based organisations in Cornwall relying on the reliefs.
  • Stamp Duty Land Tax Multiple Dwellings Relief abolished – the relief, whilst useful for clients purchasing multiple residential properties, has been the target of unscrupulous claim agents resulting in fraudulent claims made and a significant number of tax tribunal cases. The relief will apply to contracts exchanged on or before today (regardless of when completion occurs), but otherwise the relief will no-longer be available.
    • This will place more focus on whether purchases of residential property or non-residential property are being made. The government confirmed that it has decided not to make changes in relation to “mixed property purchases” that it had previously consulted on.

Tomorrow we will send a further in-depth analysis of all that featured today.