The Chancellor, Jeremy Hunt, delivered the UK Spring Budget in March 2024 and he announced several significant tax, benefits and savings measures. As always, the “devil is in the detail” and so as we enter the new tax year, we have reviewed the Red Book (the official guidance and notes that accompany the Budget statement) to highlight the important impending changes, some of which have not immediately been picked up in the media headlines.
Here are some key Private Client points from Mr Hunt’s Budget:-
- Employee national insurance contributions – Employee national insurance contributions will decrease by a further 2% (from 10%) to 8% from 6 April 2024 with Class 4 national insurance contributions paid by the self-employed reducing from 8% to 6%.
- The High Income Child Benefit Charge – The threshold increases from £50,000 to £60,000 from April 2024. The level of income at which the High Income Child Benefit Charge will be payable has also increased to £80,000. The rate at which the High Income Child Benefit Charge is paid will be halved for those with income between £60,000 and £80,000. Furthermore, the Government announced its intention to assess the High Income Child Benefit Charge on a household rather than on an individual basis by April 2026.
- Phased abolition of non-dom tax status – This was foreshadowed to be a big policy change but the announcement proved less so. From 6 April 2025, people who qualify as resident non-doms will avoid being taxed on their foreign income and gains for only four years after their arrival. However, if a person qualifying as resident non-dom arrives in the UK having been UK non-resident for a continuous ten year period (prior to their arrival in the UK), they will be allowed to bring the foreign income and gains arising in that period to the UK without being taxed. After four years, they will be taxed like all UK taxpayers. Transitional relief will be introduced that will include the opportunity for those who have previously claimed the remittance basis to bring foreign income and gains arising prior to 5 April 2025 to the UK and pay a reduced rate of income tax for 12% for a two year period.
There is also to be a move towards a residence-based approach to inheritance tax, with a consultation and no change before 2025.
The changes are of course a far cry from much earlier speculation on possible major reform or even abolition.
- UK ISA – A new UK ISA allowance of £5,000 was announced in addition to the existing allowance. This is for funds that are invested in wholly UK-based assets but this is still under consultation and no date was given for implementation. We will let you know when more details are announced.
Taxes affecting Properties
There were several changes announced that relate to property income and chargeable disposals:-
- Furnished Holiday Lettings – The Furnished Holiday Lettings (FHL) regime will be abolished from 6 April 2025. This currently gives qualifying property owners some tax advantages such as access to business asset disposal relief. Withdrawing this scheme means that these property owners will be taxed in the same way for tax purposes as landlords.
- Capital Gains Tax (CGT) rate for gains on disposals of residential properties – From 6 April 2024, the capital gains tax rate for gains on disposals of residential properties will be reduced from 28% to 24% for individuals (where the gain falls within the taxpayer’s higher rate band), trustees and personal representatives. For residential property gains within an individual’s basic rate band, the capital gains rate will remain at 18%. The capital gains tax rate will remain at 28% for gains on carried interest. Principal Private Residence relief (PPR) will still be available for disposal of an individual’s only or main residence.
- Multiple Dwellings Relief (MDR) – this will be abolished from 1 June 2024. MDR can still be claimed if a contract was entered into on or before 6 March 2024. This affects properties in England and Northern Ireland only. This change will not affect transactions in Scotland, as LBTT (Land and Buildings Transaction Tax) would apply there.
Agricultural Property Relief
The UK Government has also announced an extension to the existing scope of Agricultural Property Relief.
The intention is that this relief will now include all environmental land management schemes.
The schemes that have been specifically highlighted are the Sustainable Farming Incentive, Countryside Stewardship (and other stewardship schemes) and Landscape Recovery, as well as the England Woodland Creation Offer. Whilst these particular schemes do not operate in Scotland, the message from the Chancellor is that any land managed under an environmental agreement with, or on behalf of, the UK Government, the devolved administrations, public bodies, local authorities, or approved responsible bodies will all be in scope for Agricultural Property Relief from 6 April 2025.
The extension also removes a significant barrier to tenant farmers and landlords collaborating to enter schemes, by removing the risk that tenants’ participation in them would jeopardise the land’s eligibility for Agricultural Property Relief.
This all means that farmers and landowners taking part in such schemes (and their heirs) will benefit from an inheritance tax exemption against assets which previously would not have qualified.
This is an important change, offering a new opportunity for Inheritance Tax planning.
Conclusion
With a general election likely to happen later this year, this may not be the only Budget of 2024 and so these changes could themselves be subject to subsequent modification. For now though, clients should particularly keep in mind those alterations affecting them from this month.
If you have any queries on the Budget and its effect, Thorntons’ expert Private Client Team would be delighted to provide further guidance and help. Contact us on 03330 430150.
