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Spring Budget 2024

07/03/2024

This year’s Spring Budget is an election Budget and is likely to be the government’s final Budget before the next UK general election.  However, depending on when the election is called, and bearing in mind that the absolute deadline for holding it is 28 January 2025, it might not be the government’s last if they also get to hold an Autumn Statement.  

Given the leaks published in the media this week, the Chancellor’s announcements today that he is once again cutting National Insurance for employees and the self-employed by another 2p, came as no surprise.  Likewise, news that the government was intending to review the complex High Income Child Benefit Charge rules, with an immediate increase in the salary thresholds, was widely expected.  Also expected was that the Treasury would reform or abolish the ‘non-dom’ tax status rules to fund the NI cut.      

What wasn’t leaked though was that the government plans to launch a new British ISA, which will allow an additional £5,000 ISA allowance (on top of the existing ISA allowances) for investment in ‘promising UK businesses’.  The new UK ISA plans are subject to a consultation which will run from 6 March 2024 to 6 June 2024.  However, given the emphasis on this being ‘a Budget for Growth’ it wasn’t a complete surprise.

All things considered this didn’t feel too much like the radical pre-election tax cutting Budget that it might have been had conditions allowed the Chancellor to go further.

Bearing in mind how much work has already been done by HMRC and the industry, it was a relief to see that no changes to the new post lifetime allowance (LTA abolition) regime effective from 6 April 2024 were announced in today’s Budget.  Nor were any changes announced that would alter the previously announced ISA reform changes from the Autumn Statement. 

There were also no changes announced to the Insurance Premium Tax (IPT) regime despite some speculation that there would be. 

This is a roundup of announcements that may be useful (or interesting).  All information is lifted directly from Spring Budget-related documents published by the government (relevant links below), including the government’s Spring Budget 2024 ‘Red Book’.  

Headlines

  • Class 1 National Insurance contributions (NICs) rates – The government will cut the main rate of Class 1 employee NICs from 10% to 8%. This will take effect from 6 April 2024.
  • Class 4 National Insurance contributions (NICs) rates - The government will also make a further 2p cut to the main rate of self-employed National Insurance. This means that from 6 April 2024 the main rate of Class 4 self-employed NICs will now be reduced from 9% to 6%.
  • Class 2 National Insurance contributions (NICs) rates - The government will launch a consultation later this year to deliver its commitment to fully abolish Class 2 National Insurance.
  • UK ISA – The government will create an additional Individual Savings Account (ISA) with a £5,000 allowance. This would be in addition to the £20,000 that can be subscribed into an ISA. The government will consult on the details.
  • High Income Child Benefit Charge (HICBC) – The government will increase the HICBC threshold to £60,000 from April 2024. The rate at which HICBC is charged will also be halved so that Child Benefit is not fully withdrawn until individuals earn £80,000 or higher.  The government plans to administer the HICBC on a household rather than an individual basis by April 2026, and will consult in due course.
  • Defined Contribution pension funds disclosure requirements - The government intends to bring forward requirements for DC workplace pension funds to publicly disclose the breakdown of their asset allocations, including UK equities.
  • Value for Money (VFM) pensions framework - The government is working with the FCA and The Pensions Regulator (TPR) on the upcoming Value for Money (VFM) pensions framework.
  • Pensions Lifetime Provider – The government has confirmed that it remains committed to exploring a lifetime provider model for workplace Defined Contribution (DC) pension schemes in the long-term.  This is linked to the ‘pot for life’ proposals where the government launched a call for evidence on a lifetime provider model following the Autumn Statement to simplify the pensions market by allowing individuals to have a “legal right to require a new employer to pay pension contributions into their existing pension”. 
  • Capital Gains Tax (CGT) - The higher rate of CGT for residential property disposals will be cut from 28% to 24%. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band.
  • Environmental, Social and Governance Ratings – The government will regulate providers of Environmental, Social and Governance (ESG) ratings to users within the UK. ESG ratings providers will be brought into the regulatory perimeter of the Financial Conduct Authority.
  • British Savings Bonds – The government has announced that National Savings & Investments (NS&I) will launch a product which will offer consumers a guaranteed interest rate, fixed for three years. 
  • Replacing Non-UK Domicile tax rules with a residence-based regime – This measure abolishes the remittance basis of taxation for non-UK domiciled individuals and replaces it with a simpler residence-based regime. 
  • NatWest retail offer – The government intends to deliver a sale of part of its NatWest shareholding to retail investors. A sale would take place this summer at the earliest, subject to supportive market conditions and achieving value.
  • Stamp Duty Land Tax – Multiple Dwellings Relief a bulk purchase relief in the Stamp Duty Land Tax regime in England and Northern Ireland, will be abolished from 1 June 2024.
  • Furnished Holiday Lettings tax regime – to be abolished. 
  • VAT registration threshold - The government will increase the VAT registration threshold from £85,000 to £90,000, and the deregistration threshold from £83,000 to £88,000, freezing them at these levels. 

National Insurance and Personal tax

National Insurance contributions (NICs) rates
The government will cut the main rate of Class 1 employee NICs from 10% to 8%. This will take effect from 6 April 2024. The government will also make a further 2p cut to the main rate of self-employed National Insurance on top of the 1p cut announced at Autumn Statement. This means that from 6 April 2024 the main rate of Class 4 self-employed NICs will now be reduced from 9% to 6%.

Finally, the government will launch a consultation later this year to deliver its commitment to fully abolish Class 2 National Insurance. This follows the announcement at Autumn Statement 2023 that from April 2024 no self-employed person will be required to pay Class 2, whilst those who pay voluntarily will continue to be able to do so to build entitlement to contributory benefits. The government remains committed to reforming this complex part of the tax system while ensuring that low-income self-employed individuals will not pay more.

High Income Child Benefit Charge (HICBC) reform 
The government will introduce legislation in the Spring Finance Bill 2024 to increase the High-Income Child Benefit Charge (HICBC) adjusted net income starting threshold to £60,000, from the 2024 to 2025 tax year onwards.

The charge will apply at a rate of one per cent of the full Child Benefit award for each £200 of adjusted net income between £60,000 and £80,000, halving the rate at which HICBC is charged. The charge on taxpayers with income above £80,000 will be equal to the full amount of Child Benefit paid.

For new Child Benefit claims made after 6 April 2024, any backdated payment will be treated for HICBC purposes as if the entitlement fell in the 2024 to 2025 tax year if backdating would otherwise create a HICBC liability in the 2023 to 2024 tax year.

This measure will apply to the whole of the United Kingdom.

Pensions and Pensions tax

Basic State Pension and triple lock
As previously announced, the government is supporting pensioner incomes by maintaining the Triple Lock.  In 2024-25, the full yearly amount of the basic State Pension will be £3,700 higher, in cash terms, than in 2010. That’s £990 more than if it had been uprated by prices, and £1,000 more than if it had been uprated by earnings (since 2010).

The full rate of the basic State Pension was £97.65 a week in 2010-11 (Work and Pensions – Social Security Benefit Up-rating, National Archives, archived January 2013). A full basic State Pension will be worth £169.50 in 2024-25 (Proposed benefit and pension rates 2024 to 2025, Department for Work and Pensions, December 2023). The full yearly amount is therefore worth over £3,700 more in cash terms in 2024-25.  

Pensions Lifetime Provider
The government has confirmed that it remains committed to exploring a lifetime provider model for Defined Contribution (DC) pension schemes in the long-term. The government will undertake continued analysis and engagement to ensure that this would improve outcomes for pension savers, and build on the foundations of reforms already underway, including the Value for Money Framework.  The 'lifetime' pension provider proposals were first mentioned in last year's Autumn Statement around the Pension ‘pot for life’ proposals where the government launched a call for evidence on a lifetime provider model to simplify the pensions market by allowing individuals to have a “legal right to require a new employer to pay pension contributions into their existing pension”.

Unlocking defined contribution (DC) pension fund investment - Defined Contribution pension funds disclosure requirements
Across the pensions industry as a whole, the best data suggests investment into UK equities has fallen to around 6%. To improve data on current holdings, the government intends to bring forward requirements for Defined Contribution pension funds to publicly disclose the breakdown of their asset allocations, including UK equities, working closely with the Financial Conduct Authority (FCA) who share responsibility for setting requirements for the market. The FCA will consult in the spring. The government will introduce equivalent requirements for Local Government Pension Scheme funds in England & Wales as early as April 2024. The government will review what further action should be taken if this data does not demonstrate that UK equity allocations are increasing.

Value for Money (VFM) pensions framework
The government is working with the FCA and The Pensions Regulator (TPR) on the upcoming Value for Money (VFM) pensions framework. The framework will highlight where schemes are focusing on short-term cost savings at the expense of long-term investment outcomes, and where schemes’ current scale may be preventing them from offering value to savers. Where schemes are persistently offering poor outcomes for savers, the FCA and TPR will have the full range of regulatory powers available, and the government expects them to use the powers; these include closing a scheme to new employer entrants and, where necessary, winding up a scheme.

Financial Conduct Authority (FCA) Value for Money (VFM) proposals
The FCA’s spring VFM consultation will include proposals to require the publication of contract-based Defined Contribution (DC) default funds’ historic net investment returns and a breakdown of their UK investments. Proposals will require schemes to compare their performance, costs and other metrics against those of at least two schemes managing over £10 billion in assets. This is an initial level expected to increase significantly over time. In coordination with the FCA the government will legislate at the earliest opportunity to apply the VFM framework across the market and provide the Pensions Regulator with new powers, using secondary legislation if necessary to ensure key disclosures are in place by 2027.

Local Government Pension Scheme new reporting requirements 
Revised annual reporting guidance will require LGPS funds to provide a summary of asset allocation, including UK equity investment, as well as provide greater clarity on progress of pooling, through a standardised data return, taking effect from April 2024.

Collective money purchase (CMP) winding up
The Pension Schemes Act 2021 introduced legislation to allow collective money purchase (CMP) pension schemes to operate in the United Kingdom. The government will introduce legislation in Spring Finance Bill 2024 to ensure that the Commissioners of HMRC can accommodate the detailed provisions necessary for the treatment of funds transferred from a CMP scheme in the process of winding up.  Further consequential tax changes will then be made through secondary legislation to authorise payments made during the wind-up process.  The measure will have effect from Royal Assent to Spring Finance Bill 2024.

Savings

Individual Savings Account (ISA) annual subscription limit
No change - The adult ISA annual subscription limit will be maintained at £20,000. 

Junior ISA and Child Trust Fund annual subscription limit 
No change - The annual subscription limit for Junior ISAs and Child Trust Funds will be maintained at £9,000. 

UK ISA and British Savings Bonds
The Mansion House reforms announced in 2023 also sought to support and encourage a savings culture across the UK. That is why the government is announcing the launch of a new UK ISA and British Savings Bonds, which provide opportunities to save whilst supporting investment in the UK. 

The UK ISA will support savers and open up UK retail investment opportunities for individuals. The UK ISA will be a £5,000 allowance in addition to the existing ISA allowance and will be a new tax-free product for people to invest in UK-focused assets. The government will consult on the details. 

The British Savings Bonds will be delivered through National Savings and Investments and will be launched in April 2024. This product will offer a guaranteed interest rate, fixed for three years, increasing the savings opportunities available to consumers. The government welcomes recent market-led initiatives that open up new access routes to government financing for retail investors and will continue to examine ways in which it can support retail customers’ investment in gilts.

ISA Investment opportunities
The government is committed to ensuring people have the opportunity to invest in a diverse range of investment types through their ISAs. As previously announced at Autumn Statement 2023 this includes certain fractional share contracts, and the government is working as quickly as possible to bring forward legislation by the end of the summer following detailed engagement with industry and the FCA.

Starting rate for savings tax band
No change - The government will maintain the starting rate for savings, the 0% band for savings income, at £5,000 from 6 April 2024 to 5 April 2025.

Non-UK Domicile tax rules 

Replacing Non-UK Domicile tax rules with a residence-based regime
This measure abolishes the remittance basis of taxation for non-UK domiciled individuals and replaces it with a simpler residence-based regime. Individuals who opt into the new regime will not pay UK tax on any foreign income and gains arising in their first four years of tax residence, provided they have been non-tax resident for the last 10 years. This new regime will commence on 6 April 2025 and applies UK-wide.

This represents a significant change for those medium and long-term residents who will be affected. Transitional arrangements for existing non-doms claiming the remittance basis will include an option to rebase the value of capital assets to 5 April 2019 and a temporary 50% exemption for the taxation of foreign income for the first year of the new regime (2025-26). The government will also offer a two-year Temporary Repatriation Facility for individuals who have paid tax on the remittance basis prior to 6 April 2025 to bring previously accrued foreign income and gains into the UK at a 12% rate of tax. This facility is expected to bring in an additional £15 billion of foreign income and gains onshore to the UK and raise over £1 billion in additional tax receipts. 

Eligible employees will also be able to claim Overseas Workday Relief in their first three years of tax residence for income from employment duties carried out overseas. This represents a competitive offer for international talent to live, work and invest in the UK.

Inheritance Tax (IHT)

Residence-based regime for Inheritance Tax (IHT)
The government is announcing the intention to move to a residence-based regime for Inheritance Tax (IHT) and will consult in due course on the best way to achieve this. No changes to IHT will take effect before 6 April 2025.


Administrative change to ease the payment of inheritance tax before probate or confirmation 
From 1 April 2024, personal representatives of estates will no longer need to have sought commercial loans to pay inheritance tax before applying to obtain a “grant on credit” from HMRC.

Capital Gains Tax

The government will implement a change to Capital Gains Tax (CGT) to support the housing market. The higher rate of CGT for residential property disposals will be cut from 28% to 24%. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band. This will encourage landlords and second home-owners to sell their properties, making more available for a variety of buyers including those looking to get on the housing ladder for the first time, while also raising revenue over the forecast period. Private Residence Relief will remain in place, meaning the vast majority of residential property disposals will pay no CGT.

Property taxation

Abolition of the Furnished Holiday Lettings (FHL) tax regime
The government will remove the current incentive for landlords to offer short-term holiday lets rather than longer-term homes by abolishing the Furnished Holiday Lettings (FHL) tax regime. This will level the playing field between short- term and long-term lets and support people to live in their local area. This will take effect from April 2025 and draft legislation will be published in due course.

Stamp Duty Land Tax — Multiple Dwellings Relief (MDR)
As announced at Spring Budget 2024, the government will introduce legislation in Spring Finance Bill 2024 abolishing Multiple Dwellings Relief, a bulk purchase relief in the Stamp Duty Land Tax regime. This change will come into effect for transactions with an effective date on or after 1 June 2024. Transitional rules mean that MDR can still be claimed for contracts which are exchanged on or before 6 March 2024, regardless of when completion takes place. This is subject to various exclusions, for example that there is no variation of the contract after that date.

Stamp Duty Land Tax – First-time Buyers’ Relief: Leases and Nominees
As announced at Spring Budget 2024, the government will introduce legislation in Spring Finance Bill 2024 amending the rules for claiming First-time Buyers’ Relief from Stamp Duty Land Tax.
The changes will mean that individuals who purchase new leases using nominee or bare trust arrangements will be able to claim the relief and ensure that individuals who have used such arrangements in the past are unable to claim the relief on future purchases made in their own name.
The changes will take effect from 6 March 2024. Where contracts are exchanged on or before 6 March 2024, transitional rules may apply subject to conditions.

Corporation Tax

The government will introduce legislation in Spring Finance Bill 2024 to set the charge for Corporation Tax as it does every year, and to maintain the main rate at 25% and the small profits rate at 19%, for the financial year beginning 1 April 2025.

VAT

VAT Registration Threshold: increase to £90,000
As announced at Spring Budget 2024, secondary legislation will amend the VAT Act 1994 to increase the VAT registration and deregistration thresholds.

The taxable turnover threshold which determines whether a person must be registered for VAT, will be increased from £85,000 to £90,000.  The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £83,000 to £88,000.  These changes will apply from 1 April 2024.

Penalty Reform — VAT Credit Amendment
The government will introduce legislation in Spring Finance Bill 2024 to make technical amendments so interest for VAT operates as intended. The legislation corrects the unintentionally narrow scope of the common period rules and ensures that HMRC’s power to automatically collect overpaid VAT repayment interest applies consistently to all such amounts.

Tax Administration

Amendments to Common Reporting Standard (CRS2)
As announced at Spring Budget 2024, the government is publishing a consultation to seek views on the implementation of the Organisation for Economic Co-operation and Development’s (OECD) amendments to the Common Reporting Standard (CRS2), the international tax transparency regime for the automatic exchange of information on financial accounts.

The consultation also seeks views on two proposed changes to regulations and a potential extension of the CRS to include reporting on UK resident taxpayers by UK financial institutions.
The consultation will close on 29 May 2024.

Investment in HMRC Digital Services
The government will improve and simplify HMRC’s digital services to support Income Tax Self-Assessment taxpayers seeking to pay tax in instalments. These changes will be implemented from September 2025. These changes will be effective from 1 April 2024.

Other announcements

Raising standards in the tax advice market: strengthening the regulatory framework and improving registration
The government is publishing a consultation both on options to strengthen the regulatory framework in the tax advice market, and on requiring tax advisers to register with HMRC if they wish to interact with HMRC on a client’s behalf. The government will also explore making it quicker and easier for tax advisers to register with HMRC.

Economic Crime Levy
The Economic Crime (Anti-Money Laundering) Levy was announced at Spring Budget 2020 to raise approximately £100 million per annum to tackle money laundering and deliver economic crime reforms.  Levy receipts for the first period between April 2022 and March 2023 show a shortfall against the levy’s target of raising £100 million per year. The government’s policy objective is to mitigate this shortfall, putting funding for measures to tackle economic crime back on a sustainable footing.  The government will increase the charge paid by very large businesses with UK revenue greater than £1 billion, and which are regulated for anti-money laundering purposes, under the Economic Crime (Anti-Money Laundering) Levy (the levy). The charge for these entities will rise from £250,000 to £500,000 per annum, from tax year 2024 to 2025 onwards. Amounts are payable following the end of each financial year.  There will be no change to the charge for small entities (which remain exempt), medium entities (which will continue to pay £10,000), or large entities (which will continue to pay £36,000).


Alcohol duties
Freeze on alcohol duty extended until February 2025.

Fuel Duty 
Will remain at its current rate for the next 12 months.

Tobacco and vaping
A new duty will be introduced on vaping liquids for the first time in October 2026.  A one-off tobacco duty will be made at the same time.

Legislation

Many of the required changes will be included in the Spring Finance Bill 2024 or by Treasury Order.  As usual, however, the Chancellor's Budget statement will include resolutions made under the Provisional Collection of Taxes Act 1968 for any measures that are expected to come into effect ahead of Finance Bill Royal Assent. 

Links to further information

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