What does the March 24 UK Budget mean for our clients?

Yesterday’s Spring Budget was a classic pre-election Budget.  A series of measures designed to generate a low-cost boost of goodwill from the British voting public; many of the announced measures post-dated to beyond the date of the next UK General Election.

Fairway Tax and Accounting cuts through the spin to unpack the detail, with a summary of the key measures.

Who Needs to Read Further?

If you can answer yes to any of the following questions – you need to read further:

• Do you own a Residential Property you are considering selling?
• Are you a non-UK domicile currently living in the UK?
• Do you claim Child Benefit in the UK?
• Do you own a Furnished Holiday Lettings property?
• Do you hold Crypto Assets?
• Does your business hold assets for leasing?
• Are you planning to acquire multiple residential properties in the UK?

Taxes on Personal Income

Abolition of Non-Domicile Status – New Rules from April 2025

From 6 April 2025 the current tax-regime for non-UK domiciled individuals will be replaced by a residence-based regime:

• Anyone who has been tax-resident in the UK for more than 4 years will pay UK tax on their worldwide income and gains
• New arrivals will also get a 4-year relief before UK tax applies to their worldwide income and gains, providing they have been non-resident in the UK in the previous 10 years – know as the FIG regime
• Transitional arrangements will be put in place for existing non-UK domiciles, currently claiming the remittance basis including:
  • Option to rebase the value of Capital Assets to 5 April 2019
  • Temporary 50% exemption for the taxation of foreign income for 2025-26 for individuals moving from remittance to arising basis on 6 April 25 (note that gains are excluded)
  • Temporary Repatriation Facility for individuals who paid tax on the remittance basis prior to 6 April 2025 to bring accrued foreign income and gains into the UK at a 12% tax rate for 2025-26 and 2026-27
  • Overseas Workday Relief will be available for eligible employees to exempt employment income relating to overseas duties that is not remitted to the UK from UK tax for the first three years of UK residence

Further Reduction in National Insurance

Following the cut in the main rate of National Insurance in the Autumn 2023 Budget further cuts have been announced from 6 April 2024:

Employees had already received a 2% cut from 6 Jan 24, so the further 2% cut takes the main rate of Class 1 down from 10% to 8% from 6 April 24

For self-employed people, the 1% cut announced in the Autumn Budget was only due to take effect from 6 April 24, so the further 2% cut will reduce the main rate of Class 4 NIC from 9% to 6% from 6 April 24

Increase in Threshold for High Income Child Benefit Charge

From 6 April 2024 the adjusted net income threshold at which the High-Income Child Benefit Charge applies will increase from £50,000 to £60,000, with a sliding scale charge for incomes between £60,000 and £80,000 of 1% for every £200 of income that exceeds £60,000.

The Chancellor also announced an intention to open a consultation on plans to base the charge on household income, rather than individual income by April 2026.

New UK ISA and British Savings Bonds from April 2024

The Chancellor announced a consultation (to close on 6 June 24) on plans introduce a new UK ISA which will allow an annual investment of up to £5,000 in “UK-focussed assets” in addition to the existing ISA allowance (currently £20,000), with the investment income, like existing ISA, being free of UK tax.

He also announced the launch of a new British Saving Bond, from April 2024, offering a guaranteed fixed interest rate for 3 years.

Abolition of Furnished Holiday Lettings Tax Regime

The Furnished Holiday Letting regime, which allowed short-term holiday let owners to benefit from a more favourable tax regime than long-term leasers will be abolished from April 2025.

Capital Taxes

Cut in Higher-Rate of CGT for Residential Property

Residential property gains are currently taxed at 18% in the Basic Rate and 28% otherwise, from 6 April 2024 the top-rate will be cut from 28% to 24% (no change to the lower rate).  This may clients currently considering the sale of a residential property to hold-off until the new tax year.

Consultation on Residence-Based Regime for Inheritance Tax

In line with the abolition of non-domicile status for Income Tax, the Chancellor also announced plans to consult on a move to a residence-based regime for Inheritance Tax, though made it clear that no changes to IHT will take place before 6 April 2025.

Business Taxes

Extension of Full-Expensing of Plant and Machinery Investment to Leased Assets

Following the Autumn Budget’s announcement that the full-expensing measures for companies investing in plant and machinery would be made permanent, the Chancellor announced plans to seek to extend the measures to assets for leasing, with plans to publish draft legislation shortly.

Increase in VAT Registration Threshold

The VAT Registration Threshold will increase from £85,000 to £90,000 from 1 April 2024

Expenditure Duties

Fuel and Alcohol Duty Freezes Extended

The 5p temporary cut in Fuel Duty, has been extended with the planned inflationary rise for 2024-25 being abandoned, so Fuel Duty will remain at the current levels until March 2025.

The Alcohol Duty freeze has also been extended to 1 February 2025.

Introduction of Duty on Vaping and Increase in Tobacco Duty

From 1 October 2026 a new duty will be introduced on all vaping products, with different-rates applying for nicotine-free and nicotine-containing products.  Registrations for duty will open from 1 April 2026.  A 12 week consultation has been published on the policy design and technical details.

Tobacco Duty has also been increased by £2.00 per 100 cigarettes of 50 g of tobacco from 1 October 2026.

Stamp Duty Land Tax

Abolition of Multiple Dwellings Relief

Multiple Dwellings Relief (MDR) was introduced in 2011 to encourage investment in residential property and is available to any purchaser buying 2 or more dwellings in a single transaction or linked transactions.  It allows the SDLT to be based on the average value of the dwellings purchased instead of their aggregate value.  MDR will be abolished for all transactions with an effective date on or after 1 June 2024.  Contracts that exchanged before Budget Day (6 March) will continue to be eligible for MDF even if they complete after on or after 1 June 2024, as long as there is no variation in the contract after 6 March 24.

Other Measures

Crypto Asset Reporting Framework

A new Crypto Asset Reporting Framework will be introduced from 2026, to improve transparency and compliance.

Tightening of the Transfer of Assets Abroad Rules

Following the Supreme Court decision in Commissioners for HMRC v Fisher, the TOAA rules will be tightened from 6 April 2024 to prevent the use of companies to bypass the anti-avoidance legislation.

For more information on any of the above key measures and to understand how they impact your specific situation please email: joanne@fairwaytax.com.au