Spring Budget 2024 – The Headline Announcements for Businesses and Individuals

On 6th March, the Chancellor presented his Spring Budget 2024 to parliament. Here we outline the key measures, and the tax cuts and tax increases that will affect businesses and individuals. As ever, we urge you to make sure you're making full use of the benefits and allowances to which you are entitled following the announcement.

On 6th March 2024, Chancellor Jeremy Hunt presented his Spring Budget to Parliament.

While there weren’t as many changes announced as we might perhaps have expected with an election imminent, there were some important announcements.

Here we outline the main headlines announced in the budget, the key tax cuts and increases.

As with every fiscal statement, we urge you to make sure you are making full use of the benefits and allowances to which you are entitled, whether as a business or as an individual.

If you have any questions about the measures outlined and what they mean for you or your business, contact our business and personal tax experts without delay:

BUSINESS CUTS & RELIEFS:

VAT

In a welcome increase for small businesses, from 1st April 2024, the VAT registration threshold and deregistration thresholds will each increase by £5,000 to £90,000 and £88,000 respectively.

The thresholds have previously been frozen at £85,000 and £83,000 since 1 April 2017.

There have been no changes to the rates of VAT and the standard rate continues to be set at 20%.

CAPITAL ALLOWANCES: EXTENSION OF FULL EXPENSING TO LEASED ASSETS

The first-year capital allowances relief known as ‘full expensing’ was made permanent in the 2023 Autumn Statement.

However, expenditure on plant and machinery that was then leased to customers was excluded.

The government announced that is considering extending the 100% and 50% first year allowances to leased assets and will publish draft legislation for technical consultation shortly. This relief will still only apply to companies.

FUEL DUTY

The Chancellor announced that the fuel duty freeze will be extended for a further 12 months until March 2025.

The freeze means fuel duty will remain at 52.95p per litre.

ALCOHOL DUTY

Alcohol duty was due to rise by 3% from August but it has now been frozen until February 2025.

EXTENSION OF SUNSET DATES FOR FREEPORT AND INVESTMENT ZONE TAX RELIEFS

The government will extend the sunset dates for the tax reliefs in special tax sites to 30th September 2031 for English Freeports and Investment zones, and to 30th September 2034 for Scottish Green Freeports and Welsh Freeports. 

R&D TAX RELIEF CHANGES

For company accounting periods commencing on or after 1st April 2024, a new R&D scheme will come into effect, merging the current R&D Expenditure Credit (RDEC) scheme (for larger companies) with the Small and Medium Enterprise (SME) scheme.

There will also be a second new R&D scheme for ‘R&D intensive SMEs’ along with other amendments as part of a government campaign to tackle fraud and abuse of the scheme.

These are big changes and come on top of significant changes already seen in 2023.

If you are currently claiming (or considering claiming) R&D reliefs for an innovation project, our R&D tax experts can support you with your claims so contact us to arrange a free consultation without delay.

NATIONAL INSURANCE FOR SELF-EMPLOYED

Self-employed individuals with profits of more than £12,570 a year pay two types of NIC: Class 2 and Class 4.

From 6th April 2024, two key changes come into effect. These had previously been announced in the Autumn Statement 2023 but were further extended in this Budget:

  1. The main rate of Class 4 NICs will be cut from 9% to 6% in 2024/25 (it had been due to fall to 8% from 6th April). Class 4 NICs will continue to be calculated at 2% on profits over £50,270.
  2. Class 2 NICs (currently £3.45 a week) will effectively be scrapped, saving £179.40 per annum.

If you are self-employed, your Class 2 NIC payments have ensured you accrue entitlement to a range of state benefits, including the state pension.

If your profits exceed £6,725 in 2024/25 you will continue to accrue entitlement to state benefits despite not paying Class 2 NICs.

If your profits are less than £6,725, or you make a loss, you may choose to pay Class 2 NICs on a voluntary basis to maintain your access to certain benefits, including the state pension.  

BOOST FOR CREATIVE INDUSTRIES

In his speech, the Chancellor announced some big measures to support the UK’s creative industries. In particular:

TAX RELIEFS FOR THEATRES, ORCHESTRAS AND EXHIBITIONS

During the COVID pandemic, the government temporarily increased the headline rates of tax reliefs to theatres, orchestras, museums and galleries who were hit particularly hard.

These rates were due to end in March 2025, but the government has now confirmed that from 1st April 2025, these rates will be made permanent, set at 40% for non-touring productions and 45% for touring productions and all orchestra productions. The sunset clause for museums and galleries exhibitions tax relief will also be removed.

ENHANCED TAX CREDIT FOR BRITISH FILMS

In a move that will particularly help independent film makers, the government outlined that there will be a new enhanced audio-visual expenditure credit that will apply to films with a budget of less than £15m and that meet the British film institute test.

Claims can be made from 1st April 2025 for expenditure incurred from 1st April 2024 onwards, as long as principle photography started from 1st April 2024, and qualifying film production expenditure will attract a tax credit of 53%.

EXTRA TAX RELIEF FOR VISUAL EFFECTS

In a welcome boost to the creative sector, the Chancellor confirmed that, from 1st April 2025, the tax credit rate for visual effects costs in film and high-end TV will be increased to 39%, and the 80% cap will be removed for qualifying expenditure for visual effects costs.

CUT IN BUSINESS RATES FOR FILM STUDIOS

To support the rapid growth in film studios in the UK, the Chancellor announced a 40% relief on gross business rates for eligible film studios until 2034.

NON-BUSINESS TAX CUTS

NATIONAL INSURANCE – FOR EMPLOYEES

In a move that had been trailed before the Chancellor’s speech, it was confirmed that, from 6th April 2024, the main rate of Class 1 National Insurance Contributions (NICs) will be reduced from 10% to 8% – having recently been reduced from 12% to 10% in January 2024.

For 2024/25, this combined 4% reduction will apply to employees’ annual earnings between £12,570 and £50,270. The NIC rate on earnings above £50,270 a year remains at 2%.

Most employees will notice a slight increase in their pay packet as a result of this change from 6th April 2024. However, due to the continued freezing of tax thresholds until 2028, overall, many employees will still be worse off due to ‘fiscal drag’.

National Insurance for Employers

There were no changes to the rate or thresholds for employer’s Class 1 NICs, which remains at 13.8% for wages paid in excess of £9,100 a year (£175 per week).

HIGH-INCOME CHILD BENEFIT CHARGE

The Child Benefit system has previously been criticised for being unfair to households with one high-earning parent and child benefit ‘high-income’ threshold has been the same since 2013 despite the rising cost of childcare and a cost of living crisis.

Under the current system, if one partner earns more than £50,000, child benefit is gradually withdrawn, so that if they earn £60,000, they do not receive any child benefit at all.

Some people have seen this as unfair as this means that two parents earning £50,000 a year each would receive child benefit in full – but a household with one working parent or a single-income household earning more than £50,000 would see the benefit cut.

From April 2024, the thresholds for the high-income child benefit charge (HICBC) will be increased.

The Child benefit ‘high-income’ threshold will be increased from £50,000 to £60,000 and the income level at which child benefit is fully clawed back will rise from £60,000 to £80,000.

From 2024/25, the HICBC will be calculated at 1% of the child benefit received for every £200 of income above the threshold.

The Chancellor also announced that by April 2026, the government intends to administer the HICBC on the basis of total household income, rather than the income of the highest earner in the household, following a consultation.

CAPITAL GAINS TAX ON RESIDENTIAL PROPERTY REDUCED

The capital gains tax (CGT) annual exemption will drop to £3,000 in 2024/25, down from £6,000 in 2023/24. Those selling capital assets such as property or shares will pay more tax.

The main rates of capital gains tax remain at 10% for basic rate taxpayers (or those disposing of a business that qualifies for Business Asset Disposal Relief) and then 20% in most other cases.

However, when the asset being sold is a residential property that is not your private residence, increased rates apply.

From 6 April 2024, the residential property CGT rate will remain at 18% for basic rate taxpayers but will reduce from 28% to 24% for those with residential property gains falling outside of their basic rate band.

The Government believes that this will increase the number of transactions in the property market and benefit those hoping to get on the property ladder.

STAMP DUTY – MULTIPLE DWELLINGS

Currently, when buying two or more dwellings in a single transaction or series of linked transactions, Multiple Dwellings Relief (MDR) is available.

However, effective on or after 1st June 2024, MDR is to be abolished for purchases of residential property in England and Northern Ireland.

Transitional rules will apply, so that MDR can still be claimed in some situations where contracts were exchanged on or before 6th March 2024, regardless of when completion takes place.

OTHER KEY TAX INCREASES:

FURNISHED HOLIDAY LETS TAX REGIME ABOLISHED

If you let out commercial or residential property, the profits are taxed as part of your ‘other income’.

Generally, rental business activity attracts fewer tax reliefs than trading ventures. However, if a residential property meets the strict definition of a ‘furnished holiday let’ (FHL), then enhanced tax relief rules are currently available.

In the Spring Budget 2024, the Government announced that it will abolish the furnished holiday lettings (FHL) tax regime to remove the current tax advantage for landlords who let short term furnished holiday properties over those who let out residential properties to longer term tenants.

From 6th April 2025, profits from FHLs will be taxed in the same way as any other rental property profits. If you own FHLs this will be disappointing, especially the loss of your possible claim to ‘Business Asset Disposal Relief’ on any future sale.

It’s important to note that while the measure won’t come into force until 2025, there will be measures in place from Budget Day (6 March 2024) to prevent tax planning steps that artificially accelerate the disposal date of an FHL to a date before 6th April 2025.

If you are landlord operating furnished holiday lets, perhaps using AirBnB, please get in touch to discuss how the withdrawal of the FHL status will affect you. These changes will take effect from 6th April 2025 (for income tax and capital gains tax) and 1st April 2025 (for corporation tax), and draft legislation will be published in due course with more details.

‘NON-DOM’ STATUS TAX RULES CHANGES

In a significant change of heart, the Chancellor announced big tax changes for individuals resident in the UK but not permanently settled here (known as non-domiciled).

Existing rules allow an estimated 70,000 foreign nationals who live in the UK to avoid paying UK tax on their overseas income and gains.

While individuals resident and domiciled in the UK must pay UK taxes on their worldwide income and capital gains, it is possible for UK resident but non-domiciled individuals to claim a ‘remittance basis’ of taxation for overseas income and capital gains.

In return for paying this remittance basis charge – that can be up to £60,000 a year – non-domiciled individuals can shelter their overseas income and capital gains from UK taxation, as long as they do not bring (remit) those monies to the UK.

From 6th April 2025, the remittance basis of taxation will be abolished. It will be replaced with a simpler residence-based regime. New arrivals to the UK will only be able to avoid tax on overseas earnings for the first four years of their residency.

Transitional arrangements will be put in place for those benefiting from the current regime.

VAPING & E-CIGARETTES DUTY

Jeremy Hunt announced plans for a tax on vaping products from October 2026, along with an increase in tobacco duty to ensure it remains more expensive that vaping.

The Chancellor said: “To discourage non-smokers from taking up vaping, we are today confirming the introduction of an excise duty on vaping products from October 2026 and publishing a consultation on its design.”

The vaping levy is expected be placed on the liquid in vapes based on the amount of nicotine they contain.

The Spring Budget 2024 – Contact Leonherman’s Accounting and Tax Experts

If you have a question about any of the measures announced by the Chancellor in The Spring Budget 2024 and how they might affect you or your business, please get in touch with us and we would be happy to help.

Call us on 0161 249 5040, or email: partners@leonherman.co.uk

Important Disclaimer

This material is published for client information. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. No responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by Leonherman.

Photo by Ming Jun Tan on Unsplash

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
READ NEXT...
To get a-head in business, subscribe