Key Tax Takeaways from the Spring Budget

Below are the key tax takeaways from the Budget announcement on 6 March 2024:

National Insurance Contributions

• The headline from the Budget announcement is the cut in Class 1 National Insurance contributions for employees from 10% to 8%. The last budget announcement made in November 2023 reduced the rate from 12% to 10% as stated in our report and has already come into effect from January 2024.
• The main rate of Class 4 self-employed National Insurance will be reduced from 8% to 6% from 6 April 2024.

Inheritance Tax

• No changes were made to the Nil Rate Band which stays at £325,000 for each individual and also no increase on the Residential Nil Rate Band which remains at £175,000.
• Non-UK Property that is settled into an offshore Trust by a non-UK domiciled settlor before 6^th April 2025 will continue to be outside the scope of inheritance tax. Please refer to our briefing note in regards to the changes made to the non-domicile regime.
• Agricultural Property Relief (‘APR’) is extended to land managed under an environmental agreement with, or on behalf of the government, devolved administration, public bodies, local authorities or approved by a responsible body. This allows for some diversification of use for landowners of agricultural property.
• APR and woodland relief would be restricted to property held in the UK only from 6^th April 2024. This means qualifying property held in the Channel Islands, Isle of Man and EU are no longer eligible for the relief from next month.

Capital Gains Tax (‘CGT’)

• The higher rate on disposals of residential properties has been reduced from 28% to 24% to increase economic activity for the sale of owners of a second home. The annual exemption for an individual for CGT purposes will also be reduced from £6,000 to £3,000 from 6^th April 2024 with this particular change being introduced in an earlier budget announcement. Trustees are entitled to only half of the allowance thereby their annual exemption will be £1,500 from 6^th April 2024 onwards. Further information can be found in our briefing note here.

Income Tax

• No major changes despite an anticipation to reduce the basic rate of income tax. The personal allowance threshold is still frozen at £12,570 with the higher rate threshold at £50,270 and the additional rate coming into effect for income over the value of £125,140.

Transfer of Assets

• Legislation is to be introduced to come into effect from 6^th April 2024 to prevent individuals from using a corporate structure to transfer assets offshore. This follows on from the recent ruling in the case of Fisher v HMRC (2023) UK SC 44 which was heard in the Supreme Court recently.

Stamp Duty Land Tax (‘SDLT’)

• Multiple dwellings relief will be abolished from 1^st June 2024 which will affect purchasers who acquire more than one property in a single transaction as well as meeting other criteria. In such transactions, if contracts are exchanged before 1^st June 2024 then transitional rules will allow for this relief to still be claimed. This relief allowed purchasers to benefit from paying lower rates of SDLT on such transactions.

Furnished Holiday Lettings (‘FHL’) regime

• Property owners who own a holiday home available for short-term lets and are eligible under this regime will have their tax advantages removed such as Roll-over relief or Business Asset Disposal Relief (‘BADR’) on disposals, in addition there are no capital allowances and no income tax relief on mortgage costs. This will have effect from 6^th April 2025.

VAT

• The turnover threshold for businesses to register for VAT has increased to £90,000 coming into effect from 1^st April 2024.

If you have any concerns or queries relating to the Budget announcements or any other tax matter, please contact a member of our Wealth Planning team.