2024 Spring Budget Summary:
Can the Chancellor’s “Budget for Long Term Growth” combine tax cuts with better public services?

In an effort to incentivise work, the Chancellor announced various changes to NICs for the employed and self-employed.  This continues previous cuts to NICs announced at the 2023 Autumn Statement.

Class 1 (primary) NICs

As regards NICs for the employed, the main rate of Class 1 (primary) NICs will be reduced by 2%, from 10% to 8%. For employees paying the basic rate of income tax, the combined rate of income tax and NICs will accordingly drop from 30% to 28%.

This measure will take effect from 6 April 2024.

Class 2 NICs

The government previously announced the removal of the requirement to pay Class 2 NICs from 6 April 2024 as well as the abolishment of Class 2 NICs in its entirety in the 2023 Autumn Statement. The aim of this was said to be to simplify the tax system for the self-employed.

As announced at the 2024 Spring Budget, the government will consult on the details of the abolishment of Class 2 NICs and how it plans to deliver this later this year.

Class 4 NICs

In further keeping with the government’s theme of reducing and abolishing NICs, the Chancellor also announced that the main rate of Class 4 NICs, payable by the self-employed, will be reduced by a further 2%, from 6 April 2024.  As a 1% reduction of Class 4 NICs from that date had already been announced at the 2023 Autumn Statement, Class 4 NICs will be reduced by 3% in one go, from 9% to 6%.

This new rate of 6% will continue to apply to profits between £12,570 and £50,270 with the current rate of 2% continuing to apply to profits above £50,270.

As announced at 2024 Spring Budget, new legislation will be included in the Spring Finance Bill 2024 which will increase the adjusted net income threshold for the High Income Child Benefit Charge (HICBC) from £50,000 to £60,000. This measure is applicable for the whole of the UK and will take effect from the 2024/25 tax year onwards.

Further, the HICBC will be charged at a rate of 1% for every £200 of income above the £60,000 threshold, which will halve the rate at which HICBC is charged currently, with the effect that child benefit will not be fully withdrawn until the relevant individual earns a salary over £80,000 or higher.

For those who earn an income above £80,000, the amount of the HICBC will match the amount of child benefit received.  The amount of child benefit payable will remain unaffected.

In response to the perceived unfairness around the HICBC, which is currently charged on an individual basis, the government also plans to change the HICBC by April 2026 so that it is assessed by reference to total household income.

The government’s policy paper on the HICBC can be found HERE.

The tax regime for non-domiciled individuals will be replaced with a new residence-based regime from 6 April 2025.  The new regime will no longer use the concept of ‘domicile’ (which is often difficult to establish, given that a ‘domicile of choice’ depends on a person’s intentions), and the remittance basis of taxation for non-doms will be abolished.

Under the new regime, new arrivals to the UK (being individuals who have been non-UK resident for ten consecutive years) will benefit from 100% tax relief on foreign income and gains (FIG) for their first four years of UK tax residence, regardless of whether any such FIG are brought to the UK.  Where an individual remains UK tax resident beyond that initial four-year period, any FIG arising after such period will be taxable in the UK in the same way as for other UK residents.  Apart from being simpler to operate, the new rules are intended to remove the current incentives for non-doms to keep FIG outside the UK.

The following transitional arrangements will be put in place for existing non-doms:

• Existing non-doms who will lose access to the remittance basis on 6 April 2025 and are not eligible for the new four-year FIG exemption regime will benefit from a temporary 50% reduction in the personal foreign income subject to tax in the tax year 2025/26.
• Existing non-doms who have claimed the remittance basis, will be able to make an election for the re-basing of capital assets to 5 April 2019 levels, for disposals of such assets after 6 April 2025. Where the election is made, only chargeable gains arising after 5 April 2019 will be subject to capital gains tax.
• Existing non-doms will be able to remit FIG that arose before 6 April 2025 to the UK at a rate of 12% under a new Temporary Repatriation Facility in the tax years 2025/26 and 2026/27.
• While the government will be removing protections on non-resident trusts for all new FIG that arises within such trusts after 6 April 2025, FIG that arose in protected non-resident trusts before 6 April 2025 will not be taxed unless distributions or benefits are paid to UK residents who have been in the UK for more than four years.

The government will also consult on moving inheritance tax (IHT) to a residence-based regime.  Liability to IHT currently depends on domicile status and location of assets, where no IHT is due on non-UK assets of non-doms until they have been tax resident in the UK for 15 out of the past 20 tax years.  While decisions on changes to the IHT rules have not yet been taken, the government confirmed that the IHT treatment of non-UK assets settled into a trust by a non-UK domiciled settlor prior to April 2025 will not change, meaning that these assets will remain outside the scope of UK IHT.  There is no suggestion currently that any anti-forestalling rules will be put in place to prevent the settlement of non-UK assets into trusts by non-UK domiciled settlors prior to April 2025.

From 1 April 2024, the VAT registration threshold will increase from £85,000 to £90,000 whilst the deregistration threshold will increase from £83,000 to £88,000.

These increases apply to the taxable turnover thresholds which determine whether a person must be registered for VAT or may apply for deregistration respectively.

The government will begin legislating for the previously announced Reserved Investor Fund (RIF) in the Spring Finance Bill 2024.  The proposals for the introduction of the RIF came out of a review of the UK’s funds regime first announced at the 2020 Budget and subsequent consultation.  A summary of responses to the consultation, published at the 2024 Spring Budget, is available HERE.

The RIF will essentially be a UK unauthorised contractual scheme designed to meet industry demand for a flexible low-cost unauthorised fund vehicle.  The time when the RIF will actually be available for use has not yet been announced.  Detailed tax rules governing the RIF will be provided for by secondary legislation, which will be subject to consultation in due course.

The Energy Profits Levy (EPL), which was introduced in 2022, is a temporary 35% levy on profits arising from the upstream production of oil and gas (meaning the exploration and production of oil and gas, prior to its transportation and storage). The EPL applies in addition to the permanent tax regime of ring fence corporation tax which is charged at 30% and the supplementary charge which is charged at 10% on upstream oil and gas.

At the 2024 Spring Budget, the Chancellor announced an extension of the EPL’s sunset date by one year, from 31 March 2028 to 31 March 2029.  Accordingly, the EPL will end on 31 March 2029, or earlier if the Energy Security Investment Mechanism (ESIM) is triggered by a fall of oil and gas prices for a sustained period.  A technical note on the ESIM was published alongside the 2023 Autumn Statement, which is available HERE.

The 2023 Autumn Statement saw the “full expensing” of investment in plant and machinery made permanent (see our previous report on the 2023 Autumn Statement for further information, available HERE).  The government is now planning to extend “full expensing” to include plant and machinery for leasing (when fiscal conditions allow) and intends to publish draft legislation on this for a technical consultation in the near future.

The government has announced that HMRC will establish an expert advisory panel to support the administration of the R&D tax reliefs. The panel will provide insights into cutting-edge R&D occurring across key sectors such as tech and life sciences, and work with HMRC to review and update relevant guidance. This announcement will be welcome to taxpayers, in particular as the forthcoming merger of the two current R&D relief schemes will involve uncertainties and technical challenges (see our previous report on this HERE).

In an attempt to support the housing market, the government announced that the higher rate of CGT applicable to chargeable gains arising on disposals of residential property (where principal private residence relief does not apply) will be decreased from 28% to 24%, effective from 6 April 2024. The lower rate of CGT (applicable to any gains that fall within an individual’s basic rate band) will remain unchanged at 18%.

The government’s policy paper on the rates of CGT on residential property can be found HERE.

With the aim of levelling the playing field for short-term and long-term lets, the government will abolish the furnished holiday lettings (FHL) tax regime. Currently, landlords who let out short-term furnished holiday properties have a significant tax advantage over those landlords letting out residential properties to long-term tenants.

The FHL tax regime will be abolished from April 2025 with draft legislation to be published in due course. The legislation will include an anti-forestalling rule to prevent landlords using unconditional contracts to benefit from capital gains relief under the current FHL rules. This ani-forestalling rule will apply from the date of the 2024 Spring Budget, i.e. 6 March 2024.

The SDLT regime currently includes a bulk purchase relief known as Multiple Dwellings Relief (MDR), which is set to be abolished for transactions with an effective date on or after 1 June 2024.

Any contracts exchanged on or before 6 March 2024 can still benefit from MDR, regardless of when completion takes place (though subject to various exclusions).

The government’s policy paper on the abolition of the MDR can be found HERE.

The government announced that the rules for claiming First-time Buyer’s Relief from SDLT will be amended such that individuals who are purchasing a new residential lease through a nominee or bare trust arrangement will be able to claim the relief (in line with purchasers of freehold properties or pre-existing leases).

This measure takes effect from the date of the 2024 Spring Budget, i.e. 6 March 2024. For any contracts exchanged on or before this date, there are various transitional rules that may apply.

The government’s policy paper on the amendments to the rules for claiming First-time Buyer’s Relief from SDLT can be found HERE.

Additional tax relief for visual effects

From April 2025, the credit rate for visual effects costs in film and high-end TV will be increased to 39% and the 80% cap on qualifying expenditure for visual effects costs will be eliminated. The government will consult on the types of expenditure that will be in scope of the additional tax relief.

Enhanced credit for UK independent film

A UK Independent Film Tax Credit (IFTC) will be introduced at a rate of 53% of qualifying film production expenditure (up to 80% of a film’s total core expenditure).  This enhanced Audio-Visual Expenditure Credit is specifically for films with budgets up to £15 million that are accredited by the British Film Institute. The credit is capped at £6.36 million.

Claims for the IFTC can be submitted to HMRC form 1 April 2025 onwards, in respect of expenditure incurred from 1 April 2024, provided a film began principal photography after 1 April 2024.

Legislation will be introduced in the Spring Finance Bill 2024 to provide for permanently higher rates of relief for tax reliefs for theatres, orchestras, museums and galleries.

From 1 April 2025 such higher rates of relief will be permanently set at 40% (for non-touring productions) and 45% for touring productions and all orchestra productions.

From 1 October 2026, the government will introduce a new excise duty on vaping products (vaping devices and e-cigarettes). Alongside the 2024 Spring Budget, the government has published a 12-week consultation to finalise the technical details and policy design of the new duty.

The rates for the vaping products duty will be as follows:

• £1 per 10ml for nicotine free liquids;
• £2 per 10ml for liquid containing nicotine at concentrations between 0.1 to 10.9mg per ml; and
• £3 per 10ml for liquids containing nicotine at concentrations 11mg per ml, or above.

Alongside the vaping products duty, the government is also introducing a one-off tobacco duty increase of £2 per 100 cigarettes or 50 grams of tobacco. This will also come into force as of 1 October 2026.

The previous freeze of alcohol duty until 1 August 2024 has been extended until 1 February 2025.

The government is also freezing fuel duty rates for a further 12 months and until March 2025. This concerns the cut in fuel duty rates (for heavy oil, unleaded petrol and light oil) by 5 pence per litre.

The government has published a consultation on the implementation of the CARF, which had been consulted on by the OECD and agreed at international level, in the UK.  The government is also seeking views on amendments to the CRS in that same consultation.  The consultation (which is available HERE) will run from 6 March 2024 to 29 May 2024.

Implementation of the CARF

The CARF is a global tax transparency framework which provides for the automatic exchange of tax information on transactions in cryptoassets in a standardised manner with the jurisdiction of taxpayers on an annual basis.  Broadly, this works by cryptoasset service providers being required to conduct due diligence on taxpayers receiving cryptoasset services and report certain data to the tax authorities in the service providers’ jurisdictions.  Such data will then be exchanged with partner jurisdictions where the taxpayers are resident.

The consultation concerns some optional elements of the CARF and the manner of implementation.

Amendments to the CRS

The CRS, which was published by the OECD in 2014, is the global standard for automatic exchange of financial account information, with the purpose of promoting tax transparency and countering offshore tax evasion.  The CRS has been implemented in over 100 jurisdictions and is in force in the UK.

The OECD has recently made some amendments to the OECD, inter alia to include digital financial products, introduce some additional reporting requirements and provide for a new, optional, category of “Non-Reporting Financial Institution” designed to exempt low risk entities (such as certain charities) from reporting requirements.

The consultation concerns some optional elements of the amendments to the CRS and the manner of implementation.

Extending the scope of the proposed CARF and the existing CRS to domestic reporting

The proposed CARF and existing CRS do not require domestic reporting where UK reporting entities have to provide information on UK resident taxpayers.  The consultation covers a proposal for an extension to domestic reporting.

The UK’s anti-avoidance landscape includes what is known as the “Transfer of Assets Abroad” rules, which broadly concern the transfer of assets by a UK resident individual to a non-resident trust, company or other entity for a tax avoidance purpose.

At the 2024 Spring Budget, the government announced the extension of those rules so that they will also cover indirect transfers by companies.  This will to some extent reverse HMRC’s recent defeat in the Supreme Court in the case of HMRC v Fisher [2023] UKSC 44.

This measure will apply from the date of the 2024 Spring Budget, i.e. 6 March 2024.

The government will provide an update on the progress of its work to tackle non-compliance (in particular as regards UK employment tax rules) by umbrella companies (which are commonly used in arrangements for the provision of workers). New guidance to support workers and other businesses who use umbrella companies is also being prepared for publication during the summer of 2024.