Tax E-News – Budget March 2024
On 6 March 2024, Chancellor Jeremy Hunt presented his Spring Budget to Parliament. In the knowledge that the government must hold a general election before 28 January 2025, this was a Budget designed to restore confidence and win voters. But on the heels of Britain entering a recession and downgraded Office for Budget Responsibility (OBR) forecasts, the Chancellor had his work cut out.
Headlines included further cuts in National Insurance Contributions for workers and the self-employed, a slight increase in the VAT registration threshold and an increase in thresholds to reduce the number of people affected by the high-income child benefit charge. There has also been a cut in capital gains tax for higher earners disposing of residential property. However, income tax rates and thresholds remained static and inheritance tax continues to apply to the largest estates.
Below, we talk more about the Budget and what it means for you (See the full report by clicking the link.)
INCOME TAX
Please note that ‘tax years’ run to 5 April each year and that, for example, 2024/25 signifies the year to 5 April 2025.
Your personal allowance
Your tax-free personal allowance will remain at £12,570 in 2024/25. The personal allowance is partially withdrawn if your income is over £100,000 and then fully withdrawn if your income is over £125,140.
Income tax rates and allowances …
EMPLOYMENT TAXES
For employees
As announced in Autumn Statement 2023 and in effect since 6 January 2024, the main rate of Class 1 National Insurance Contributions (NICs) has already reduced from 12% to 10%.
In the Budget, the Chancellor cut this by a further 2 percentage points to 8%, taking effect from 6 April 2024 …
NATIONAL MINIMUM WAGE (NMW)
Employers must pay their employees at least the national living wage (for workers aged over 21) / national minimum wage. The minimum hourly rates change on 1 April each year and depend on the worker’s age and if they are an apprentice …
NATIONAL INSURANCE FOR THE SELF-EMPLOYED
Self-employed individuals with profits of more than £12,570 a year pay two types of NIC: Class 2 and Class 4. Two key changes come into effect from 6 April 2024, as previously announced in Autumn Statement 2023 and further extended in this Budget:
- The main rate of Class 4 NICs will be cut from 9% to 6% in 2024/25. Class 4 NICs will continue to be calculated at 2% on profits over £50,270.
- Class 2 NICs will effectively be abolished, saving £179.40 per annum …
VAT
From 1 April 2024, the VAT registration threshold and deregistration thresholds will each increase by £5,000 to £90,000 and £88,000 respectively. The thresholds had 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%.
CORPORATE TAXES
Rates from 1 April 2024
Corporation tax rates and thresholds remain at the levels used in the year to 31 March 2024 as follows …
BUSINESS TAX
Tax relief for expenditure on plant and machinery
By way of a £1million Annual Investment Allowance (AIA) and, for companies only, unlimited ‘full expensing’, your business is likely to be able to claim 100% tax relief on qualifying equipment purchases.
Conditions may apply and, in some cases, the rate of tax relief in the year of purchase can be 50% or less. In particular, some connected or group businesses need to share their £1million AIA limit between them and this is something that HMRC are currently focusing on so please do talk to us if you have any concerns …
CAPITAL GAINS TAX
Annual exemption
The capital gains tax (CGT) annual exemption will drop to £3,000 in 2024/25, down from £6,000 in 2023/24. This change will mean that those selling capital assets such as property or shares will pay more tax.
Rates …
TAX REGIME FOR FURNISHED HOLIDAY LETS
If you let out residential or commercial property, the profits are taxed as part of your ‘other income’. If you sell property that has been rented out, capital gains tax is likely to apply. 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), enhanced tax relief rules are currently available …
INHERITANCE TAX
Rates and thresholds
The main rate of inheritance tax remains at 40%, reduced to 36% for estates where 10% or more is left to charity.
The inheritance tax nil rate band continues to be frozen at £325,000. The residence nil rate band will also remain at £175,000 and the residence nil rate band taper will continue to start at £2million …
UK RESIDENCY AND DOMICILE
Significant tax changes have been announced for individuals resident in the UK but not permanently settled here (known as non-domiciled).
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 a remittance basis charge of up to £60,000 a year, non-domiciled individuals are able to shelter their overseas income and capital gains from UK taxation, as long as they do not bring (remit) those monies to the UK …
STAMP DUTY
England and Northern Ireland – thresholds
The £250,000 0% threshold for Stamp Duty Land Tax (SDLT), applicable in England and Northern Ireland, remains unchanged until 31 March 2025. The same is true of the £425,000 0% threshold for first-time buyers …
ALCOHOL AND FUEL DUTIES
In Budget news, the government has confirmed that alcohol duty will remain frozen until 1 February 2025 and that the previous 5p per litre cut in fuel duty will remain in place until March 2025.
CHARITIES AND GIFT AID
In anticipation of enhanced protections for consumers who take out subscription contracts, the government will soon introduce rules to ensure that charities which operate subscription models can continue to claim Gift Aid on those subscriptions.
IN CONCLUSION
As we move into 2024/25, there are a lot of tax changes on the horizon, with more likely to come alongside the general election. Where the government gives with one hand (e.g. NIC cuts for workers) they may take with the other hand (e.g. frozen income tax thresholds) and it can be hard to keep up …