Introduction

Cuts to National Insurance contributions and the abolition of so-called 'non-dom' tax breaks were among the headline announcements in the Spring Budget 2024.

The Chancellor delivered his speech in the House of Commons, unveiling a range of tax and spending measures.

However, there was no cut to income tax, despite much speculation in recent weeks that one might come due to the General Election, set to be held this year.

Aside from the headlines mentioned above, some of the other most significant announcements included:

- Cut to property capital gains tax

- Rise in VAT registration threshold

- Full expensing to apply to leased assets

- New British ISA

- Rise in child benefit threshold

- Freeze on fuel duty

Below, we delve into more of the details and summarise the biggest changes that were unveiled this afternoon.

National Insurance contributions (NICs) to be cut

As expected, Mr Hunt's main announcement surrounded NICs. In line with prior media reports, he went even further than the changes he made on NICs in the Autumn Statement last November.

He announced a 2p cut in NICs. From April 6 employee NICS will be cut from 10% to 8%. Meanwhile, self-employed NICS will go from 8% to 6%.

Mr Hunt said: "It means an additional £450 a year for the average employee or £350 for someone self-employed. When combined with the autumn reductions, it means 27 million employees will get an average tax cut of £900 a year and 2 million self-employed will get a tax cut averaging £650."

The move is estimated to be worth over £10 billion a year for workers across the UK. Combined with the abolition of the requirement to pay Class 2 NICs, an average self-employed person on £28,000 will save £650 a year from April 6, the Treasury estimated.

Mr Hunt had already announced a reduction in employees' National Insurance (NI) by two percentage points from 12% to 10% (for Primary Class 1 contributions) in November - a change affecting an estimated 27 million people.

Non-dom tax breaks to be abolished

As had been trailed in many of the newspapers in the week leading up to the Budget, the contentious 'non-dom' scheme will be scrapped.

Mirroring what has been one of the higher profile policies of the Labour Party, Mr Hunt said the tax breaks for wealthy foreign residents in the UK will be abolished and replaced with a new scheme.

So-called non-doms are UK residents but not domiciled here for tax purposes.

Mr Hunt said the Government would "introduce a system which is both fairer and remains competitive with other countries."

"The Government will abolish the current tax system for non-doms, get rid of the outdated concept of domicile and the remittance basis in the tax system, and replace it with a modern, simpler and fairer residency-based system," he told Parliament.

The plan is that, from April 2025, new arrivals to the UK will not be required to pay any tax on foreign income and gains for their first four years of UK residency. Those who stay after four years will then pay the same tax as other UK residents.

The Treasury described the new scheme as the 4-year foreign income and gains (FIG) regime.

The Treasury stated: "Individuals who on 6 April 2025 have been tax resident in the UK for less than 4 years (after 10 years of non-UK tax residence) will be able to use this new regime for any tax year of UK residence in the remainder of those 4 years."

Officials also revealed (in the documents released after the Budget speech) that Overseas Workday Relief for the first 3 tax years of UK residence will be "retained and simplified".

VAT registration threshold increase

In a move designed to cut the burden of admin and the financial impact of VAT, the VAT registration threshold is to increase from £85,000 to £90,000 from April. Although this was not as high as some commentators had hoped, it is the first increase in 7 years and will bring "tens of thousands of businesses out of paying VAT altogether and encourage many more to invest and grow", Mr Hunt told MPs.

Cut to property capital gains tax

The higher rate of property capital gains tax is to be reduced from 28% to 24%.

The Government said that it had concluded, following a review of costs by the Treasury and the OBR, the change would increase revenues because there would be more transactions.

However, the lower rate will remain at 18% for any gains that fall within an individual's basic rate band.

On that point, the official Budget papers stated: "This will encourage landlords and second homeowners to sell their properties, making more available for a variety of buyers including those looking to get on the housing ladder for the first time, while also raising revenue over the forecast period."

New British ISA and British Savings Bonds

The Government will create a "British ISA" to encourage the public to invest exclusively in the UK. This will allow people to save an extra £5,000 tax-free per year by investing in UK equity. It will carry "all the tax advantages of other ISAs".

This would be in addition to the £20,000 that can be subscribed into an ISA. The government will consult on the details.

Some commentators immediately raised doubts on the merits of the new ISA. They say that geographic diversity is key for having a diversified portfolio - being invested in a variety of markets around the world in case one falls short or even crashes. However, Mr Hunt said he had listened to calls from 200 professionals in the British stock market, who will see this as good news.

He also trailed a new British Savings Bonds. Watch this space for more news on that.

Chancellor takes 'further steps' on Full Expensing

In a move he described as a tax cut for businesses, Mr Hunt confirmed the Government will introduce permanent Full Expensing. He said it was worth £10bn a year for companies.

A capital allowance tax scheme, the move enables businesses to write off 100% of the cost of investment on qualifying items such as new or improved technology, equipment, machinery or buildings.

Having announced it as a temporary measure in March 2023, the Treasury will shortly publish draft legislation for Full Expensing to apply to leased assets. This will be implemented "when fiscal conditions allow", the Treasury said.

Furnished Holiday Lettings regime scrapped

Tax breaks for second homeowners letting to holiday makers are to be axed. The Furnished Holiday Lettings regime is to be disbanded, Mr Hunt revealed. Currently, the tax breaks make it more profitable for second homeowners to let out their properties to holiday makers rather than to residential tenants to rent, raising concerns over the availability of long-term rental housing for local people. Multiple Dwellings Relief is also being abolished.

Oil companies windfall tax extended

The UK's windfall tax on the profits of oil and gas companies will be extended to 2029. Officially titled The Energy Profits Levy, it was introduced in 2022 to ensure that oil and gas producers in the UK "pay their fair share of tax from extraordinary profits". The Government said the extension was motivated by the forecasts of gas prices to "remain abnormally high until at least 2028-29". Mr Hunt told MPs it would raise a further £1.5bn.

Raising child benefit threshold

The Chancellor revealed the High Income Child Benefit Charge (HICBC) threshold will rise. Instead of kicking in at £50,000, from April 2024 it will move up to £60,000.

And a consultation is set to get underway on moving the charge to a household-based system in time to start by April 2026.

The Government said there was an unfairness in the current system - the fact it's charged on an individual basis. The example it gave was two parents earning £49,000 each (with a household income of £98,000) wouldn't reach the threshold, but a single parent earning over £50,000 would.

Childcare support expanded

Further information was set out on plans to extend the 30-hour free childcare offer to all children of working parents from 9 months. Mr Hunt gave more details, saying he would be guaranteeing rates paid to childcare providers. The impact of the plans overall will mean an extra 60,000 parents entering the workforce in the next four years, Mr Hunt said.

Fuel duty freeze extended

A 5p cut to fuel duty will be maintained - with a freeze extended for another 12 months until February 2025. Mr Hunt said this will save the average motorist around £50 next year. It will also "bring total savings since the 5p cut was introduced to around £250", Mr Hunt added.

Alcohol duty frozen until next year

The Government will freeze alcohol duty from 1 August 2024 until 1 February 2025, lengthening the six-month freeze announced at Autumn Statement 2023, with the intention to "support the hospitality sector and help consumers with the cost of living".

Pension pots for life

There was a brief mention for the idea of giving people one 'pension pot for life'. The Chancellor said the Government will continue to explore previously trailed plans, with a consultation already underway.

The reforms would give workers the right to nominate the pension scheme they want their employer to pay into, which it's claimed could help solve the problem of lost pension pots as workers move jobs. He announced the plan in the Autumn Statement.

Tax credits for film industry to rise

Some film studios are set to benefit from 40% gross business rates relief until 2034. The UK has become "Europe's largest film and TV production centre", Mr Hunt said, before announcing the rate of tax credit available to the industry will rise by 5%. Furthermore, an 80% cap for visual effects costs will be removed.

Orchestras, museums, galleries and theatres will also benefit from a permanent 45% tax relief for touring productions and 40% relief for non-touring productions. The UK's creative industries will be backed by over £1 billion overall, the Treasury said.

Research and Development funding

The Budget includes an additional £45 million to "accelerate medical research" into common diseases like cancer, dementia and epilepsy. It's part of a £360 million package to support innovative R&D and manufacturing projects across the life sciences, automotive and aerospace sectors.

The Green Industries Growth Accelerator will be allocated an extra £120 million to build supply chains for offshore wind and carbon capture and storage, officials added.

New tax on vaping and tobacco duty rise

A duty on vapes will be introduced from October 2026. Officials said the move was designed to "protect young people and children from the harm of vaping". The existing tax on tobacco will increase, to maintain the "financial incentive to choose vaping over smoking". This will raise a combined £1.3 billion by 2028/29.

Updates on the economy and Government spending

Inflation

Inflation should fall below the 2% target set by the Government in a few months, according to the Office for Budget Responsibility report, Mr Hunt announced. When he came to office inflation was at 11%, he said, whilst the latest figures show that it is now at 4%. Mr Hunt told MPs: "We have turned the corner on inflation."

Debt and borrowing figures announced

Following OBR forecasts back in 2022 that headline debt would rise to above 100% of GDP, the Chancellor updated the Commons on projections for the next five years.

The OBR now says it will fall in every year to just 94.3% by 2028-29.

Mr Hunt said: "Underlying debt, which excludes Bank of England debt, will be 91.7% in 2024-25 according to the OBR, then 92.8%, 93.2%, 93.2% before falling to 92.9% in 2028-29 with final year headroom against debt falling of £8.9bn."

Growth figures revealed

MPs also heard the latest forecasts from the OBR on economic growth. These were:

2024 - 0.8%

2025 - 1.9%

2026 - 2%

2027 - 1.8%

Government spending

Day-to-day public spending will stay at 1% growth in real terms but "we are going to spend it better," Mr Hunt pledged.

He added: "It's not fair to ask taxpayers to pay for more when public service productivity has fallen. Nor would it be wise to reduce that funding given the pressures that public services face."

You‘ve probably digested the main news by now from the Spring Budget. Now comes the next stage:the Spring Finance Bill. The bill was published on 14 March, ensuring that the measures announced in the Budget take their next steps towards becoming reality.

Whenever a government announces new taxation in a Budget or Spring or Autumn Statement, these plans require statutory (or legislative) authority. A number of tax changes will now be enshrined into law if the bill passes as expected.

Cuts to National Insurance contributions and the abolition of so-called ‘non-dom‘ tax breaks were among the biggest headline grabbers in Jeremy Hunt‘s Budget. The changes to National Insurance, which will take effect on 6 April 2024, for employees and self-employed people, are being legislated through a separate Bill.

The Bill received its first reading in Parliament on 13 March. It will now follow the normal passage through Parliament, with a second reading on 17 April.

The Bill also legislates for several tax changes that have been previously announced and consulted upon, including maintaining the current rates for income tax and corporation tax and the Starting Rate for Savings.

A summary of the major announcements from the Budget:

• Cut to property capital gains tax
• Rise in VAT registration threshold
• Full expensing to apply to leased assets
• New British ISA
• Rise in child benefit threshold
• Freeze on fuel duty

You may have seen somewhat of a furore breaking out in the media towards the end of the month, as HMRC announced its tax helpline would shut down for half of the year. Rather than use the phone line, anyone seeking help from HMRC officials would be faced with using online services such as a chatbot instead. The proposal meant the Self-Assessment line would be closed from 8 April to 30 September. It follows a trial last year.

However, the Chancellor Jeremy Hunt, appeared to step in and order HMRC to scrap the plan. HMRC has since announced a pause to the idea. It has begun a consultation to look into the impact that shutting the helpline would have for small businesses and taxpayers.

HMRC Chief Executive Jim Harra said: “Making best use of online services allows HMRC to help more taxpayers and get the most out of every pound of taxpayers' money by boosting productivity.

“Our helpline and webchat advisers will always be there for those taxpayers who need support because they are vulnerable, digitally excluded or have complex affairs.

“However, the pace of this change needs to match the public appetite for managing their tax affairs online. We've listened to the feedback and we're halting the helpline changes as we recognise more needs to be done to ensure all taxpayers' needs are met, whilst also encouraging them to transition to online services.”

Will the plan still go ahead eventually? We'll likely hear the outcome in the coming weeks.

We‘ve seen plenty of speculation before the last two Budgets that Inheritance Tax would see major reforms. Yet nothing materialised. And the latest figures released by the Treasury show perhaps why there might be some reluctance to change the rules, with the amount of tax received hitting a record high.

The latest stats have shown that the Treasury looks set to collect £7.54bn in the 2023/24 tax year. That‘s higher than the previous record of £7.1bn, which was recorded in the 2022/23 tax year.

The Treasury has brought in £6.8bn in IHT receipts from April 2023 to February 2024 - £400m more than the same period last year.

The latest batch of statistics released by the Government showed a number of other forms of taxation also reeled in higher intake than previously.

VAT collected was significantly higher in the first 11 months of the 23/24 tax year. The figure reached £160bn - £9bn more than the previous year.

Officials reported that Income Tax, CGT, NICs receipts for April 2023 to February 2024 were £430.3 billion. That was £23.2 billion higher than the same period last year.

PAYE Income Tax and NIC1 receipts for April 2023 to February 2024 were £369.1 billion, which is £23.4 billion higher than the same period last year.

However, there was a slightly lower figure for the amount of Income Tax Self-Assessment. The figures for receipts for April 2023 to February 2024 showed that number reached £42.1 billion, a fall of £0.1 billion compared to the same period in the previous year.

Funerals that are broadcast online for well-wishers unable to attend in person are becoming exempt from VAT. During the COVID pandemic, streaming  funerals became commonplace due to restrictions on the number of people gathering. Now, there has been an update to the rules around VAT which means any funerals shown live over the web will not face the charge.

The update also includes live streaming of a cremation or burial. If VAT has been charged in the past, then an adjustment can be made on future VAT returns.

This has been added to a list of services that are always exempt from VAT if they are “provided by an undertaker or funeral director after the body of the deceased has been released by the mortuary (if applicable),” HMRC says.

These services are:

• embalming
• use of a rest
• digging, preparation, and the refilling of graves
• burial or cremation
• the interment of ashes

However, the VAT update is not applicable for a third-party supplying the live streaming event,as opposed to being provided by the undertakers.

Q: I’m a property owner, and I’m considering renting one of my houses out for people to use for vacations. What are the tax rules I need to understand?

A: It‘s a timely question, and unfortunately for you, there was a change announced in the Budget that will mean you can no longer benefit from a certain type of tax relief in the future.

At the moment, there are tax breaks for second homeowners letting to holiday makers in the shape of the Furnished Holiday Lettings (FHL) regime.

Among the advantages of the scheme is  the fact that property owners can deduct the full amount of finance costs, such as mortgage interest, from FHL income. And when selling the property, business asset disposal relief may be available. That results in a 10% capital gains tax rate applying.

But the FHL scheme is to be disbanded, Jeremy Hunt has revealed. Currently, the tax breaks make it more profitable for second homeowners to let out their properties to holiday makers rather than to residential tenants to rent, raising concerns over the availability of long-term rental housing for local people.

According to HMRC, if you rent properties that qualify as FHLs, you can get the following benefits:

• you can claim Capital Gains Tax reliefs for traders (Business Asset Rollover Relief, Entrepreneurs‘ Relief, relief for gifts of business assets, and relief for loans to traders)
• you‘re entitled to plant and machinery capital allowances for items such as furniture, equipment, and fixtures

Furthermore, the profits count as earnings for pension purposes,meaning tax-advantaged pension contributions can be made.

If the change takes effect and is passed into law, the existing rules will be scrapped from April 2025. But you would have one year during which you could benefit from the current scheme. If you‘d like to understand more about the tax implications of property ownership, please get in touch.

Q: I’m a self-employed electrician. I want to undertake some training to help me run my business, but it’s quite an expense. Is there any way I can claim back the costs of training?

A: There are absolutely times when, as a sole trader or self-employed individual, you will be able to count the costs of training as an allowable business expense. It does depend on the circumstances and details. In March, HMRC published updated guidance on retraining tax deductibility to help people understand this area better.

HMRC says its latest guidance "ensures that updating existing skills, maintaining pace with technological advancements, or changes in industry practices are allowable costs when calculating taxable profits."

It‘s helpful to look at a few examples to try to understand better what is or is not allowable. In your case, let‘s say it‘s a bookkeeping course you want to do at the local college. An electrician‘s day to day work doesn‘t entail bookkeeping, of course. But as a sole trader, you need to understand accounts and how to run your business efficiently. So, a course on bookkeeping would be relevant and an allowable expense.

But if you wanted to learn a new skill to start a totally new business, that‘s where it wouldn‘t qualify. The skills training has to be relevant to your existing business.

And, when someone is learning skills in a different field, they‘re likely to not qualify. So, one example: a painter and decorator decides they want to change their business completely by going into taxi driving instead. They want to claim the costs of a taxi driving course, but as the costs will not relate to the purpose of the existing business,i.e. painting,it can‘t count as an expense.

Q: I’m about to become a father in the next few months, with our baby arriving in late June. Am I entitled to any kind of Government help as a dad taking paternity leave?

A:There are changes just about to take effect that could be beneficial to you. Already, fathers receive a statutory weekly rate of Paternity Pay worth £172.48, or 90% of their average weekly earnings (whichever is lower). However, from this month (April 6 2024), fathers and partners can take Paternity Leave in separate blocks, rather than having to take the full two weeks in one go. At the moment you‘re only entitled to one block of two weeks, but you‘ll be able to split this out in the future. You will be able to choose to take your leave and pay at any point during the first year after the birth. It also applies if you are adopting a child too. And the amount of notice you have to give your employer is also changing – just four weeks. Paternity pay will be paid out on your usual salary slip, with both income tax and National Insurance taken off.

Please contact us if we can help you with these or any other tax or accounts matters.
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