Spring Budget 2024

Early in the speech, Mr Hunt promised permanent cuts in taxation before moving on to temporary changes such as prolonging the freezes in alcohol and fuel duties.

We were then taken to measures to improve investment, that strangely included an increase in the VAT registration threshold from £85,000 to £90,000; good news for some, but will this create growth or simply move the point at which small businesses slow down to avoid registration? We recall comments from within government before the last Autumn Statement that there were as many calls for a decrease in the threshold as there were for an increase.

There was further discussion about encouraging pension fund investment in UK businesses and about the introduction of an additional British ISA, allowing a further £5,000 investment. Like many of the announcements, this was not the first that had been heard on these topics.

There were positive announcements for the creative industries, with a new tax credit for UK independent films with a budget of less than £15m and permanent 40% and 45% rates for Theatre, Orchestra, Museum and Galleries tax reliefs. This led to a joke about the Shadow Chancellor acting like a Tory that was less forced than most during the afternoon, although this was not a speech that will be remembered for its wit.

Having then discussed public services and the opportunity for significant efficiency gains, the Chancellor then moved on to his final and, perhaps key, theme of lower taxes.  

Before that, some tax increases:

• The introduction of a vaping excise duty from October 2026 and a corresponding increase in tobacco duty;
• An increase in air passenger duty on all but economy flights;

and the abolition of:

• The furnished holiday letting regime from 6 April 2025; and
• Multiple dwellings relief from Stamp Duty Land Tax from 1 June 2024.

There was some respite for property owners in that the rate of capital gains tax on residential property will reduce from 28% to 24% from 6 April 2024.

Mr Hunt then moved on to the two ‘headline’ announcements. Firstly, a further 2% reduction in national insurance contributions for the employed and self-employed from 6 April. The reason for the differential in the cuts announced in the Autumn Statement became clear as both rates will now have been cut by one third for the next tax year.

Then, the other key announcement; the abolition of the ‘non-dom’ regime.

Many will be aware that those not domiciled in the UK can elect to pay UK tax only on UK source income and capital gains together with foreign income and gains remitted to the UK. This election is free for seven years, after which a charge must be paid to qualify, before the right expires after 15 years of residence.

Fewer may be aware that non-doms are only subject to UK inheritance tax on UK assets.

From 6 April 2025, these rules will disappear and be replaced with a temporary residence regime for income tax and capital gains tax and a residence-based approach to inheritance tax.

Subject to certain conditions, foreign income and gains are to be tax-free for the first four years of residency.

The announcement of this major change was, predictably, met with derision from the opposition who have been advocating it for several years.

Our specialists will be analysing the non-dom changes and advising clients and contacts as further details emerge but at first blush the changes look likely to simplify the rules and to provide planning opportunities for those who have been within the regime up to now. It appears that there may be opportunities to:

• Rebase certain assets and so reduce capital gains tax on a future sale;
• Remit previously untaxed income and gains at a tax rate of 12% for a limited period;
• Settle offshore trusts before the inheritance tax changes are introduced to keep foreign assets outside the UK tax net.

One size will not fit all, and advice needs to be tailored to personal circumstances.

Finally, the unfairness of the income test for Child Benefit is to be addressed, although not immediately.

Currently, where a member of the household has income of £50,000 or more benefit begins to be lost, but a household with two incomes each just below that amount lose nothing.

Resolving this anomaly is, apparently, technically difficult and while a solution is found the £50,000 threshold is to increase to £60,000 with the level at which all benefit is lost being increased to £80,000. This is very good news for those families that are impacted, but the problem has been obvious since the rules were introduced and led to the question at the heart of Sir Keir Starmer’s reply:

“Why now?”

The taxation of carried interest and the tax treatment of private schools remain significant tax policy differences between the parties, but with national insurance reductions and the non-dom changes, Mr Hunt has adopted much of the opposition’s tax agenda.  Is he ‘doing the right thing’ or spiking their guns before the election?

All in all, there was little ‘new’ in today’s speech with most, if not all, of the key announcements having been well trailed in the press over the past few days.