In this Spring Budget statement on 6 March 2024, Jeremy Hunt, the Chancellor of the Exchequer, used what may be his last set piece parliamentary economic statement prior to the forthcoming general election to set out some major personal tax changes. Further tax administration measures will be announced on 18 April 2024.
Businesses (except those in the energy sector) have little to worry about this time around, following the UK corporation tax increase to 25 percent, the adoption of rules intended to achieve a global 15 percent minimum tax rate and full expensing for plant and machinery expenditure over the past couple of years. The Government confirmed that it was proposing to extend the full expensing for plant and machinery expenditure for leasing but only when economic conditions allow. An extension of the Energy Profits Levy (the 35 percent levy on profits arising from the upstream production of oil and gas) for an additional year to 31 March 2029 was also announced.
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Further incentives for the creative sector were announced worth a total of circa £1 billion over the next five years. A 53 percent UK independent film tax credit will be introduced for films with budgets under £15 million from 1 April 2024, a five percent increase in tax relief for UK visual effects in film and high-end TV, with UK visual effects costs exempt from the 80 percent cap on qualifying expenditure from 1 April 2025 and the rates of relief for theatres, orchestras and museums made permanent from 1 April 2025 at 45 percent for touring and 40 percent for non-touring productions. Eligible film studios will benefit from a 40 percent relief on gross business rates until April 2034.
Other business rates measures include an extension of the empty property relief reset period from six to thirteen weeks from 1 April 2024 and the consultation on the introduction of a general avoidance rule.
The VAT registration threshold will be increased from £85,000 to £90,000 from 1 April 2024 ending a seven-year freeze.
The two percent cut in the main rate of national insurance contributions (NIC) for employees and self-employed from 6 April 2024 was well trailed in advance as was the expectation that fuel duty will be frozen for yet another year. Taking into account the NIC changes announced last autumn, compared with 2023 this will be a total four percent cut in the main NIC rate for employees to eight percent with a three percent cut in the self-employed rate to six percent from 6 April 2024.
The threshold for applying the high income child benefit charge has been increased by £10,000 to £60,000 from 6 April 2024 with the rate of the charge effectively halved by increasing the end of the taper range by £20,000 to £80,000. Further changes to this charge are on the horizon with HMRC being given the power to look at total household incomes so that this regime could in future apply to the total household income rather than on an individual basis.
In order to fund these significant tax giveaways, the Chancellor did not change his existing tight proposals for government spending over the next five years of a one percent per year real increase in spending but instead has focused on using investment in artificial intelligence and information technology to increase productivity in the national health services and other areas.
Tax raising measures introduced by the Chancellor include the abolition of multiple dwellings relief for stamp duty land tax with effect for completions on or after 1 June 2024 and contract exchanges after 6 April 2024, the abolition of the special tax treatment of furnished holiday lettings and the reduction of capital gains tax rate on residential property to 24 percent (which is expected to increase tax revenue).
The largest tax raising measure is the abolition of the existing non domicile regime from 6 April 2025 which will be replaced with a new exemption for foreign income and gains for the first four years of UK residence of an individual coming to the UK on the proviso that they have not been resident in the UK for the last ten years. Overseas workday relief will be retained and simplified for employees in their first three years of residence, though from 6 April 2025 it will only be available to new arrivals in the UK who are eligible for the foreign income and gains (FIG) regime. This significant change will involve removing the existing income tax and capital gains tax protections for non-resident trusts (unless a settlor is eligible for the FIG regime at the time a charge arises) although the inheritance tax benefits of trusts created by non domiciled individuals may continue.
Transitional relief will apply for those individuals who currently benefit from the remittance basis and will not benefit from the new four year exemption with a 50 percent reduction in income tax rates on personal foreign income in the 2025-26 tax year. Remittance basis users will also be able to claim to rebase foreign assets to 6 April 2019 and foreign income and gains which have arisen prior to 6 April 2025 will be eligible to be remitted to the UK at a tax rate of 12 percent under the temporary repatriation facility.
Existing non-UK domiciliaries will need to take care to understand the new rules and the potential benefits provided by the transitional regime over the next year.
Another significant change to personal taxation is the proposed change to the inheritance tax system from one based on domicile to one based on residence in conjunction with connection factors, to take effect from 6 April 2025. Depending on the details, which will be subject to consultation, it is possible that non-UK assets will fall into and out of scope of UK inheritance tax 10 years after arriving in the UK, or 10 years after emigrating from the UK, respectively.
It is said that to govern is to choose. The Chancellor has chosen to steal one of Labour’s prominent tax policies to part fund his NIC cut for employees and the self-employed while keeping future government spending on a tight leash. Whether this has any impact on the general election time will tell.
