Spring Budget 2024: The key announcements

Spring Budget 2024: The key announcements

A Budget benefitting employees and employers

In what is widely regarded as the last Budget before the next UK general election, all eyes were on whether Jeremy Hunt would offer up any tax breaks amid historic highs in the overall tax burden. As is the norm, rumours were swirling in the lead up on what may be offered up as a means of providing individuals and businesses with, in many cases, a much-needed financial boost.

Employees and employers look to be the winners from a Budget that has put lowering the tax burden of employment and the work ethic centre stage in a bid to encourage more individuals back into the workplace and help employers fill vacancies to improve the UK’s productivity.

A further 2% reduction in Employee National Insurance from 10% to 8% from April (and a reduction from 9% to 6% for the self-employed) will provide a significant tax saving for an estimated 29m people in work. These savings can be enhanced further where businesses can consider ways to enhance their staff reward options - for example, introducing salary exchange arrangements (for pensions and electric cars) can produce savings for both employees and for the business. Businesses can use those savings to further expand their staff rewards, perhaps considering private health insurance, gym memberships etc, which are allowable against corporation tax. Businesses can focus on recruitment, retention and reward for key employees and how having a strong Employee Benefits package can be used to help drive productivity and growth.

Here, we document the key headlines from the Chancellor’s statement.

Personal & employment taxes

• National Insurance - Saving the average worker around £450 a year (based on a £35,000 salary), the Class 1 employees’ National Insurance rate is to be cut by a further 2%, from 10% to 8% as of April ‘24. This follows the 2% reduction that was announced in the Autumn Statement and came into effect from 6 January 2024. When combined with the January reduction, this gives a total combined saving of £900 a year (based on the above salary). Higher earners will benefit more than the lower paid, and there will inevitably be regional variations.
• Self-employed - National Insurance will also be cut from 9% to 6%, representing a typical annual saving of £650 for an “average” self-employed person on £28,000 a year (when combined with the abolition of the requirement to pay Class 2 contributions that was announced in the Autumn Statement).
• Individual Savings Accounts (ISAs) – A new British ISA is to be introduced in the form of an extra £5,000 tax free allowance to be invested exclusively in shares in UK companies with the same tax advantages as other ISAs.
• Capital Gains Tax (CGT) – The rate of CGT on residential properties is to be reduced from 28% to 24% for higher rate taxpayers. CGT is paid on the gain when a residential property which is not the individual’s main residence is sold or disposed of.
• Non-domiciled tax status – The tax break for wealthy foreign residents in the UK with ‘non-dom’ status will be scrapped and reformed. It will be replaced by a “modern, simpler and fairer residency system”. From April 2025, new arrivals to the UK will not have to pay tax on foreign income and gains for the first four years of UK residency. After this point, those who continue to live in the UK will then have to pay the typical UK rates on all of their income and gains as applies to UK domiciled residents. Transitional rules will apply to certain individuals where on 6 April 2025 they have already been tax resident in the UK for less than 4 years.
• High Income Child Benefit Charge – from April 2024 the £50k tapering threshold will increase to £60k and the top taper threshold will increase from £60k to £80k with the clawback being 1% for every £200 of income over £60,000. The charge will be reformed from April 2026, moving to a fairer “household based” assessment.

Business taxes

• Capital allowances – Draft legislation to be published making full expensing apply to leased assets. Full expensing, a £10bn overall tax cut for businesses, was made permanent in 2023’s Autumn Statement.
• VAT registration threshold – From 1 April, the VAT threshold for businesses will be increased to £90,000 from £85,000. While not the level many were hoping for, this represents the first increase in seven years and means businesses with an annual taxable turnover less than £90,000 will not be required to register for VAT.  HMRC estimate this will allow around 28,000 businesses to deregister for VAT.

Other announcements

• Alcohol duty – For the benefit of pubs, the alcohol duty freeze is to be extended until February 2025.
• Fuel duty – In order to avoid a 13% increase set for this month, the 5p cut will be maintained and fuel duty is to be frozen for another 12 months. This is set to save the average car driver £50 next year.
• Visual effects tax relief – The tax credit relief to be increased by 5% and the 80% cap to be removed.
• Stamp duty – In a bid to stop misuse, the stamp duty relief for people buying more than one dwelling is to be abolished.
• Furnished Holiday Lettings (FHL) - the FHL tax regime will be abolished from 6 April 2025, meaning short-term and long-term lets will be treated the same for tax purposes. This is intended to level the playing field between short- term and long-term lets and support people to live in their local area.
• Investment Zones – Extension of Investment Zones in Scotland and Wales from 5 to 10 years, same as England. Investment Zones benefit from 100% enhanced capital allowances for plant or machinery and 20% enhanced structures and buildings allowances.
• Freeports - Extension of tax reliefs in Freeport tax sites from 5 to 10 years (until Sep 2031 for England; until Sep 2034 for Scotland and Wales). Freeport tax sites benefit from 100% enhanced capital allowances for plant or machinery and 10% enhanced structures and buildings allowances.

Podcast | Spring Budget Special

In this Spring Budget special of our Bang the Drum podcast, four of the UK’s leading tax experts join host Emma Sheppard for live reaction to Chancellor Jeremy Hunt’s statement.

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Webinar |  Year end tax planning opportunities and a Spring Budget breakdown 

Join our tax specialists after the dust has settled as they cover:

• The key announcements and their possible impact
• Strategic tax planning tips ahead of April’s personal tax year-end – all with the aim of reducing or managing any associated liabilities and requirements.
• Key tax planning opportunities that you should consider if you are a business owner

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We are here to help

If you have any questions on the announcements and how they may impact your position, please get in touch with your usual Azets advisor or a member of our specialist team.