SPRING BUDGET 2024: WHAT TAX CHANGES CAN UK BUSINESSES ANTICIPATE?

Spring Budget 2024: What Tax Changes Can UK Businesses Anticipate?

Spring Budget 2024: What Tax Changes Can UK Businesses Anticipate?

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This week, all eyes were on Chancellor Jeremy Hunt during his Spring Budget 2024 address, as the self-employed, landlords and business owners awaited potential tax cuts ahead of the upcoming general election, particularly concerning Self Assessment Tax Returns.

We’ve summarized the key fiscal announcements from the Spring Budget, highlighting business tax measures that may impact you and your enterprise.

National Insurance


A key expectation for this Budget was a reduction in employee National Insurance rates, which has now been confirmed. The rate will decrease from 10% to 8%, resulting in an estimated annual savings of £450 for the average worker. Combined with last year's 2p cut, this brings the total tax savings to approximately £900 per year.

Self-employed individuals will benefit as well, with the National Insurance rate dropping from 8% to 6%, translating to an average tax reduction of £650.

Increase in VAT Registration Threshold


In a notable shift, the VAT registration threshold will increase from £85,000 to £90,000 starting April 1st, marking the first adjustment in seven years. This change will ease the administrative burden for small businesses nearing the threshold.

Property Tax Changes


Significant announcements were made regarding property taxation, particularly affecting Furnished Holiday Lettings (FHL), Stamp Duty Land Tax (SDLT), and Multiple Dwellings Relief (MDR):

  • Furnished Holiday Lettings: The Chancellor revealed plans to abolish the FHL tax regime from April 2025, impacting those who currently benefit from favorable tax treatments like mortgage interest offsetting and reduced Capital Gains Tax rates.

  • Stamp Duty Land Tax: The abolition of Multiple Dwellings Relief, due to concerns over misuse, will apply to transactions completed after June 1, 2025.

  • Capital Gains Tax: A positive note for property owners, the higher rate for property Capital Gains Tax will be reduced from 28% to 24%.


Changes to Non-Domicile Tax Status


Starting April 2025, the non-domicile tax regime will be replaced with a simpler residency-based system. New residents will enjoy a four-year grace period during which they will not be taxed on foreign income or gains. A two-year transitional period will also encourage the influx of overseas wealth, taxable at a rate of 12%.

Inheritance Tax Reforms


Upcoming changes to Inheritance Tax (IHT) will link it to the residency status of beneficiaries, similar to the Irish model. Details are to be finalized, with implementation after April 6, 2025.

Adjustments to High Income Child Benefit Charge


From April 2026, the High Income Child Benefit Charge (HICBC) will be assessed on a household basis rather than individually, benefiting many families. The threshold will rise from £50,000 to £60,000, with full repayment limits increasing to £80,000.

Capital Allowances and Full Expensing


The government has extended the full expensing initiative, which allows companies to claim 100% capital allowances on qualifying plant and machinery investments, to leased assets as well. The implementation timeline is still to be determined.

British ISA Reform


The ISA system will be revamped with the introduction of a "British ISA," adding a £5,000 allowance for investments in UK equities on top of the existing £20,000 limit.

Support for SMEs


An additional £200 million will fund the extension of the Recovery Loan Scheme, which supports SMEs in securing financing for growth and investment.

Pensions and Investment Updates


While not as extensive as anticipated, pension reforms will explore options for portability of pension pots during job changes. A new British savings bond will also be introduced, offering savers a fixed guaranteed rate over three years.

Additional Tax Reliefs



  • Alcohol Duty: A freeze on alcohol duty will benefit pubs and the hospitality sector.

  • Fuel Duty: Another year of fuel duty freeze will assist businesses facing rising fuel costs.


Economic Outlook


The Office for Budget Responsibility (OBR) predicts inflation will decrease from 11% to 4%, with further reductions expected. The forecast indicates that headline debt will fall to 94% of GDP by 2028/29, and the UK is set to maintain the second-lowest level of government debt in the G7.

Summary


The Spring Budget 2024 reveals a government focused on tax cuts for the average worker as the general election approaches. However, there was a lack of announcements regarding personal tax rate reductions and increases in the IHT Nil Rate Band. The anticipated changes to non-domicile status were broader than expected, signaling considerable adjustments ahead for advisors.

Landlords and property investors faced notable setbacks with the abolishment of favorable tax regimes, leaving many hoping for more supportive measures for the self-employed and business owners.

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