abmoconsultancy.com

The economy

The Chancellor insisted that the economy has turned the corner. He has delivered on the Prime Minister’s three economic priorities: ‘inflation has fallen, growth has been more resilient than expected, and debt is forecast to fall’.

The Office for Budget Responsibility (OBR) is forecasting inflation below 2% by 2024 Q2. Whilst growth has been lower than forecasted, the International Monetary Fund now thinks that the UK will have the third fastest cumulative growth in the G7 over the period 2024–28. Mr Hunt asserted that the debt and borrowing fiscal rules are on track to be met.

Individuals

Employee National Insurance contributions (NICs) will be cut to 8% from April 2024 and self-employed Class 4 NICs will be reduced to 6%. The Government is doubling up on its Autumn Statement changes hoping, no doubt, that this will have greater impact. Whilst a cut in income tax might garner more headlines, a cut in NICs targets workers. Indeed the Chancellor is hinting that one day he would like to get rid of NICs altogether but, in current economic circumstances that can be regarded as wishful thinking.

The Chancellor gleefully stole the Labour Party’s planned abolition of non-dom tax status (though he said it had been Nigel Lawson’s idea). These rules enable non-UK domiciled individuals living in the UK to avoid UK tax by keeping overseas income and gains offshore. From April 2025 onwards, overseas income and gains will be exempt from UK tax for the first four years of residence. From year five onwards, non-doms will be taxed on worldwide income and gains in the same way as any other UK resident. Transitional measures will ease the change for existing non-doms.

It is widely recognised that the high income child benefit charge (HICBC) is sub-optimal. Under that regime, child benefit is clawed back from families where at least one parent earns over £50,000. The rules are seen as unfair because they apply based on individual, rather than household, income. From April 2026, therefore, the HICBC will apply on a household basis. In the meantime, from 6 April 2024, the HICBC threshold will be increased to £60,000.

Individuals who dispose of a residential property which isn’t their main residence currently pay tax on any gain at 28%. From 6 April 2024, this rate is to be reduced to 24%, meaning that it may be better to defer taxable sales.

A new ‘UK ISA’ which will have its own £5,000 annual allowance is coming, but no indication of when – only that the details will be consulted upon.

There were no substantive changes to inheritance tax – certainly not the abolition which some commentators had predicted. However, it was confirmed that agricultural property relief and woodland relief are to be restricted to property in the UK and the ‘grants on credit’ requirements will be eased. There is an intention to replace the non-doms regime with a residence based regime from April 2025.

Alcohol duty will now remain frozen until February 2025. In addition, fuel duty will be frozen for another year until March 2025. In contrast, the Chancellor announced the introduction of a duty on vaping products in October 2026, and a one-off increase in tobacco duty at the same time. The alcohol duty stamps scheme is to close.

It is worth remembering that these tax cuts are still dwarfed by increases in the tax take due to fiscal drag.

Property tax

The furnished holiday lettings rules are to be abolished from April 2025. As this regime gives tax breaks to landlords who let out property on a short-term basis, its abolition must be intended to encourage lettings to longer-term tenants. This is a major change for holiday letting businesses.

Rooted in the same intention to free up properties, the stamp duty land tax multiple dwellings relief is to be abolished for transactions with an effective date on or after 1 June 2024 (subject to transitional provisions).

Businesses

There was strikingly little for businesses – no reduction in employer NICs and no adjustment to the main corporation tax rate of 25%.

For small businesses it was announced that the VAT registration threshold is to increase from £85,000 to £90,000 from 1 April 2024; businesses may feel that this relatively small increase is not sufficient to compensate for the fact that this will be the first increase in seven years.

Of wider interest, full expensing is to be extended to leased assets. No indication of timing for this but draft legislation will be published for consultation shortly.

One area that did get some attention was creative industry reliefs. The Chancellor announced:

  • a new independent film credit at 53% of qualifying expenditure (with a cap) for films that commence principal photography from 1 April 2024 on expenditure incurred from that date;
  • the permanent extension of higher rates of theatre tax relief, orchestra tax relief and museums and galleries tax relief; and
  • additional relief for expenditure on visual effects.

The public sector

A good chunk of the speech was taken up with the Government’s programme designed to return public sector productivity to pre-pandemic levels.

A £3.4bn programme for the NHS will apparently unlock £35bn in cumulative productivity savings from 2025–26 to 2029–30.

Similar programmes are planned for other areas of Government.

A lot of these improvements will be delivered by a ‘technological and digital transformation’. The experience of the Post Office gives one pause for thought.

There are to be significant cuts to non-protected areas of Government expenditure.

Summary of tax measures announced by the Chancellor in his Spring Budget Statement.

  • A reduction in the rate of Class 1 primary (employees) National Insurance contributions (NICs) from 10% to 8% from 6 April 2024.
  • A reduction in the rate of Class 4 (self-employed) NICs from 8% to 6% from 6 April 2024.
  • The high income child benefit charge (HICBC) threshold to be increased from £50k to £60k, with the level at which child benefit is fully repaid increased to £80k, from the 2024–25 tax year onwards. HICBC will also be assessed on a household basis rather than an individual basis by April 2026, following consultation.
  • The higher rate of capital gains tax on residential property gains will be cut from 28% to 24% from 6 April 2024.
  • The 5p per litre cut and freeze on fuel duty will remain until March 2025.
  • Alcohol duty will continue to be frozen until 1 February 2025.
  • The furnished holiday lettings tax regime, which provides tax advantages for short-term furnished holiday properties, will be abolished from April 2025.
  • The temporary increases in the rates of tax relief for orchestras, museums, galleries, and theatres will be made permanent at a rate of 45% tax relief for touring productions, and 40% relief for non-touring productions, from 1 April 2025.
  • A new 53% tax credit for independent British films with a budget of less than £15m will be available via the audio-visual expenditure credit (AVEC), for films commencing photography from 1 April 2024.
  • A 40% relief on gross business rates until 2034 for eligible film studios in England.
  • The VAT registration threshold to be increased from £85,000 to £90,000 and the deregistration threshold increased from £83,000 to £88,000 from 1 April 2024.
  • The non-UK domiciled (‘non-dom’) tax regime will be abolished and replaced from 6 April 2025 by a new regime under which new arrivals will not pay UK tax on foreign income and gains for the first four years of residence (only), before paying tax in the normal way.
  • The sunset clause on the energy profits levy will be extended by one year to 31 March 2029.
  • An excise duty on vapes will be introduced from 1 October 2026, alongside an increase in tobacco duties from the same date.
  • Stamp duty land tax multiple dwellings relief will be abolished for transactions from 1 June 2024.

The HMRC policy paper: Spring Budget 2024 – Overview of tax legislation and rates (OOTLAR) provides an overview of the key points arising in the Chancellor’s Statement.

Leave a Reply

Your email address will not be published. Required fields are marked *