Spring Budget 2024

Income Tax Allowance + National Insurance + Rate Bands

Please be aware that the Scottish Parliament has had the power for a number of years to vary the tax rates and thresholds of Non-Savings, Non-Dividend income for Scottish taxpayers. The differential between Scotland and the rest of the UK in this respect has grown quite significantly as demonstrated by the chart below. This makes things even more complicated for Scottish taxpayers when looking at carrying out any legitimate form of tax planning.

Like Scotland, the National Assembly of Wales can vary the tax rates in respect of Welsh resident taxpayers as regards Non-Savings and Non-Dividend income. However, to date they have continued to set income tax rates in line with that announced by the UK Government.

The Income Tax Personal Allowance and all other elements of the Income Tax system remain part of the Chancellor’s responsibility.

As was previously announced in the 2022 Autumn Statement, the Personal Tax Allowance currently set at £12,570, will remain at this level until 2028. The Basic Rate Tax Band, presently set at £37,700 will also stay the same until April 2028. Personal allowances will be reduced by £1 for every £2 a person’s income exceeds £100,000.

UK Tax Rates 2024/25 (except Scotland)

Scottish tax rates 2024/25 re non-savings, non-dividend income

• As announced in the Autumn Statement 2023, from 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs, but will continue to receive access to contributory benefits, including the State Pension.
• The employees NIC rate will be reduced from 10% down to 8% from April 2024.
• The self-employed Class 4 NIC rate will fall from 8% to 6% from April 2024.

2024/25 National Insurance rates

*2022/23 Class 3 NI weekly contributions can be paid up to 5^th April 2025 to cover missing state pension years back to 2006.

Dividends

• As already announced, the zero rate tax dividend threshold will fall from £1,000 to £500 from 6^th April 2024.
• There will be no change to the dividend tax rate.

Furnished Holiday Letting (FHL)

• The FHL tax regime will be abolished, eliminating the tax advantage for landlords who let out short-term furnished holiday properties over those who let out residential properties to longer-term tenants. This will take effect from April 2025.
• Draft legislation will be published in due course and will include an anti-forestalling rule.
• This will prevent the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains relief under the current FHL This rule will apply from 6 March 2024.

Capital Gains Tax (CGT)

• Currently gains made on disposals of residential property that do not qualify for main residence relief (MRR) are chargeable to CGTat 18% for any gains that fall within an individual’s unused basic rate band and 28% where the chargeable gains exceed the unused part of their basic rate band
• From 6^th April 2024, the higher capital gains tax rate on the sale of residential property will be reduced to 24% from 28%.
• This change may impact upon individuals, trustees and personal representatives who are liable to pay Capital Gains Tax (CGT) on residential property gains.
• The lower rate for basic rate taxpayers will remain at 18%.
• A reminder that the CGT annual exemption (AE) for individuals, personal representatives (PR) and Trustees is set to fall next tax year.

UK CGT Annual Exemption

*Note – the AE is only available to PRs for 2 tax years following the tax year in which the Deceased died.

** Note – the AE is divided equally between the number of Trusts set up by the Settlor (the AE is presently capped at £300  per Trust if 5 or more, or 10 or more if for the benefit of a disabled person).

UK CGT Rates

*If the Trust asset disposed of has been used in the beneficiary’s business, the gain may attract a 10% CGT rate.

High Income Child Benefit Charge (HICBC)

• The individual’s High Income Child Benefit Charge (HICBC) adjusted net income threshold will increase from £50,000 to £60,000, from 6 April 2024.
• For individuals with income between £60,000 and £80,000, the rate at which HICBC is charged is halved, and will equal one per cent for every £200 of income that is more than £60,000.
• New claims to Child Benefit are historically automatically backdated by three months, or to the child’s date of birth (whichever is later).
• However, for Child Benefit claims made after 6 April 2024, backdated payments will be treated for HICBC purposes as if the entitlement fell in the 2024/25 tax year if the backdating would otherwise create a HICBC liability in the 2023/24 tax year.
• A consultation will take place to introduce legislation from April 2026 to base the HICBC on household income as opposed to an individual’s income in order to make the system fairer.

Non-Dom Tax Status

• From 6 April 2025, the current remittance basis of taxation will be abolished for UK resident non-domiciled individuals.
• This will be replaced with a new 4-year foreign income and gains (FIG) regime for individuals who become UK tax resident after a period of 10 tax years of non-UK residence.
• Qualifying individuals will not pay tax on FIG arising in the first 4 tax years after becoming UK tax resident and will be able to bring these funds to the UK free from any additional charges.
• They will not pay tax on non-resident trust distributions either.
• Individuals, who on 6 April 2025, have been tax resident in the UK for less than 4 years (after 10 years of non-UK tax residence) will be able to use this new regime for any tax year of UK residence in the remainder of those 4 years.
• Claims to use the new 4-year FIG regime are to be made for each year to which it is to apply.
• Individuals need not make a claim for every year of the 4-year period. For example, an individual who makes a claim for the new 4-year FIG regime in year 1 but chooses not to make a claim for year 2 will still be able to claim for years 3 and 4.
• If an individual leaves the UK temporarily during the 4-year period they will be able to make a claim under the 4-year FIG regime for any of the qualifying tax years remaining on their return to the UK.
• If an individual chooses to be taxed under the new 4-year FIG regime, they will lose entitlement to personal allowances and the capital gains tax annual exempt amount.
• Overseas Workday Relief (OWR) for the first 3 tax years of UK residence will be retained and simplified.
• From 6 April 2025 eligibility for OWR will be based on an employee’s residence and whether they opt to use the new 4-year FIG
• From 6 April 2025, the protection from taxation on future income and gains as it arises within trust structures (whenever established) will be removed for all current non-domiciled and deemed domiciled individuals who do not qualify for the new 4-year FIG
• FIG arising in non-resident trust structures from 6 April 2025 will be taxed on the settlor or transferor (if they have been UK resident for more than 4 tax years) on the arising basis.
• Individuals who move from the remittance basis to the arising basis on 6 April 2025 and are not eligible for the new 4-year FIG regime will, for 2025-2026 only, pay tax on 50% of their foreign income.
• From 6 April 2025, an individual who is not, or who later ceases to be, eligible for the new 4-year FIG regime will be taxed on foreign gains in the normal way.
• Transitionally, individuals who have claimed the remittance basis will, on a disposal of an asset held personally at 5 April 2019, be able to elect to rebase that asset to its value as at that date.
• From 6 April 2025, individuals who have been taxed on the remittance basis will be able to elect to pay tax at a reduced rate of 12% on remittances of pre-6 April 2025 FIGunder a new Temporary Repatriation Facility (TRF) which will be available for tax years 2025-26 and 2026-27.
• TRF will not apply to pre-6 April 2025 FIG generated within trusts and trust structures.

Pensions

• The annual pension allowance will remain at £60,000 for 2024/25.
• The money purchase annual allowance will remain at £10,000.
• The minimum Tapered Annual Allowance will remain at £10,000 for individuals who’s adjusted income for the year is £260,000 or more.
• From 6^th April 2024, in the event of a pension member dying under the age of 75, any lump sum tax free limit not utilised by the deceased will remain tax free in the hands of qualifying beneficiaries. Any excess above that limit will be taxed at the beneficiaries marginal rate of tax.
• The pension tax free lump sum percentage will remain at 25% of the pension value up to a maximum of £268,275. However those individuals who have protected rights already in place can take a higher tax free amount.
• There are some individuals who save into an occupational pension under the net pay arrangements, but whose taxable income is below the personal allowance, thereby missing out on tax relief relating to those pension contributions.
• With effect from the 2024/25 tax year onwards the intention is to remove this unfairness.
• Shortly after the end of that tax year, HMRC will aim to contact those impacted by this and request their bank account details. Upon receipt they will pay the ‘tax relief’ amount into that account.

Individual Savings Account (ISA)

• The government will introduce a new UK ISA with its own allowance of £5,000 a year. This will be on top of the existing ISA allowance of £20,000.
• They will consult on the details at a later date.
• The government is also committed to ensuring people have the opportunity to invest in a diverse range of investment types through their ISAs.
• They are working to bring forward legislation by the end of the summer following detailed engagement with industry and the Financial Conduct Authority (FCA).

State Pension (SP)

• Under the triple lock, SP rises in line with the highest of average earnings, inflation or 2.5% based upon September 2023 figures.
• The highest figure was the average earnings rate for September 2023 of 8.5%.
• The Government have already announced that the SP will increase by 8.5% from April 2024.

Inheritance Tax (IHT)

• As stated within the 2022 Autumn Statement, the 40% IHT rate, the £325,000 IHT Nil Rate Band and the £175,000 Residence Nile Rate Band (RNRB) will remain in place until April 2028.
• The commencement of the tapering off of the RNRB will remain at £2 million.
• Agricultural property relief is a relief from IHT available on the agricultural value of land and other property that is owned and occupied for the purposes of agriculture.
• To ensure compatibility with EU law, action was taken in Finance Act 2009 to expand the scope of agricultural property relief and woodlands relief to property located in the EEA.
• As a result of the UK leaving the EU, with effect from 6^th April 2024, this legislation will be reversed.

Annual Tax on Enveloped Dwellings (ATED)

The ATED charge for those property companies liable to pay it, has been increased by 6% in respect of the 2024/25 ATED year.

Cultural Reliefs

• From 1 April 2025, the rates of Theatre Tax Relief, Orchestra Tax Relief and Museums and Galleries Exhibition Tax Relief will be permanently set at 40% (for non-touring productions) and 45% (for touring productions and all orchestra productions).
• Rates for these cultural reliefs were temporarily increased from 27 October 2021 to help the sector in their economic recovery from COVID-19 and is currently set at 5% higher than is proposed from April 2025.
• There will be additional support for ‘independent films’ that can currently claim the Audio-Visual Expenditure Credit (AVEC) – the Independent Film Tax Credit (IFTC).
• Films that meet the IFTC qualifying criteria will be eligible for a higher rate of expenditure credit on their qualifying expenditure.
• The basic rate of credit under AVEC is 34% — independent films will receive a rate of 53%.
• Qualifying expenditure will be capped at a maximum of 80% of a film’s total core expenditure; the most taxable credit a film can receive will be £6.36 million.
• The changes will take effect for films that commence principal photography from 1 April 2024 on expenditure incurred from 1 April 2024. Claims may be submitted from 1 April 2025.

Construction Industry Scheme (CIS)

• As announced in the Autmn Statement 2023, from 6^th April 2024, subcontractors will have to demonstrate compliance with VAT obligations to be granted and keep gross payment status.
• HMRC will be able to immediately cancel gross payment status to include cases where they have reasonable grounds to suspect fraud involving VAT, Corporation Tax, Income Tax and Pay As You Earn.

Tax Avoidance

• Legislation will be introduced so that individuals cannot bypass the anti-avoidance legislation, the Transfer of Assets Abroad provisions, by using a company to transfer assets offshore in order to avoid tax. This applies to individuals who are resident in the UK.
• The changes will take effect for income arising to a person abroad from 6 April 2024.

Corporation Tax

The corporation tax rates for those companies who do not make profits from oil extraction or oil rights in the UK or UK continental shelf have not presently been changed in respect of the financial year 2024 (starting 1^st April 2024). So at present it is as follows:

Rates for corporation tax years starting 1^st April

VAT

• The taxable turnover threshold for determining whether a business must register for VAT will increase from £85,000 to £90,000 from 1^st April 2024 and the point at which a business can apply to deregister will rise from £83,000 to £88,000.
• Following digitisation of the DIY Housebuilders Scheme, HMRC will be given additional powers to request further evidential documentation in relation to a DIY housebuilder’s claim.
• This will assist the Commissioners in validating claims and carrying out compliance checks.
• The power will come into force on the date of Royal Assent and will apply to claims made on or after the day the provisions come into force.

Capital Allowances

• As announced at Autumn Statement 2023, for corporates, full expensing and the 50% first-year allowance for special rate assets were made permanent.
• Expenditure on plant or machinery for leasing is presently excluded from these allowances.
• Draft legislation will be published, along with a consultation to consider any potential extension to include plant and machinery for leasing at a future date.

Research & Development (R&D) and Patent Box

• As announced in the Autumn Statement 2023, for accounting periods beginning on or after 1^st April 2024 there will be the merger of the existing research and development tax relief scheme for small and medium-sized companies (SME) and the research and development expenditure credit (RDEC) used by large companies.
• The SME rules restricting relief where part of the project expenditure has been subsidised have been removed.
• Loss-making companies claiming the existing SME tax relief will be eligible for a higher payable credit rate of 14.5% if they meet the definition for R&D
• For accounting periods beginning on or after 1^st April 2024, the intensity threshold will be reduced from 40% to 30%.
• There will be a one-year grace period that allows a company which fails to meet the intensity threshold, for example due to a one-off shock or small fluctuations in expenditure (for companies close to the threshold), to continue claiming the enhanced support in that year if it met the intensity threshold and successfully claimed enhanced support in the previous year.

National Minimum Wage (NMW) and National living Wage (NLW)

A reminder that the NMW and NLW are due to increase from the beginning of April 2024.

Accommodation offset £9.99

Stamp Duty Land Tax (SDLT) – England & Northern Ireland

• The SDLT residential rates and thresholds will remain as they are until 31^st March 2025 inclusive.
• Currently Multiple Dwellings Relief (MDR)is available to any purchaser buying 2 or more dwellings in England and Northern Ireland, in a single transaction, or linked transactions, and allows the purchaser to calculate the tax based on the average value of the dwellings purchased as opposed to their aggregate value.
• MDR will be abolished from 5^th March 2024.
• Purchasers who exchanged contracts on or before 6 March 2024 remain eligible for MDR regardless of when the transaction completes, provided there is no variation of the contract after that date
• MDR will also continue to apply to contracts which substantially perform before 1 June 2024.
• For transactions which are linked and include the purchase of dwellings both before and after the change, those pre and post change transactions will be treated as unlinked for the purposes of MDR.
• First time buyers purchasing a new residential lease in England and Northern Ireland via a nominee or bare trust will, for completions on or after 6^th March 2024, be able to claim SDLT Tax First-time Buyers’ Relief.
• The SDLT surcharge on acquiring an interest, in excess of £40,000, in a second residential property remains at 3%.
• The Devolved Parliaments of Wales and Scotland set their own land transaction tax rates.

England + Northern Ireland SDLT residential rate

*First time buyers relief  – no SDLT up to £425,000 then 5% between £425,001 and £625,000. If property in excess of £625,000 then no relief due..

**Non-UK resident person may have to pay an additional 2% SDLT surcharge.

Wales residential Land Transaction Tax (LTT) 2024/25 rates

Scotland’s residential Land & Buildings Transaction Tax (LBTT) 2024/25 rates

*For first time buyers the zero rate band increases to £175,000

Vaping Duty + Tobacco Duty Rates + Alcohol Duty

• The government announced that it would introduce a new Vaping Products Duty from October 2026.
• A consultation will be held to set out the proposals for how the duty will be designed and implemented.
• Registration for the duty will open on 1 April 2026 with the duty taking effect from 1 October 2026 alongside a proportionate increase in tobacco duties.
• The government will make a one-off tobacco duty increase of £2 per 100 cigarettes or 50 grams of tobacco from 1 October 2026.
• The vaping duty will apply to liquids for use in vaping devices and e-cigarettes at the following rates:
  1. £1 per 10ml for nicotine free liquids.
  2. £2 per 10ml for liquid containing nicotine at concentrations between 0.1 to 10.9mg per ml.
  3. £3 per 10ml for liquids containing nicotine at concentrations 11mg per ml or above.
• Alcohol duty will remain frozen until 1 February 2025.
• The Alcohol Duty Stamp Scheme that applies to many retail containers for spirits, wine and other fermented products will be wound down in due course.
• Draft legislation will be published later in 2024 for an orderly wind-down of the Scheme.

Further Announcements

• Fuel duty remains at its current rate, keeping the ‘temporary’ 5p cut which has been in place since 2022 until March 2025.
• There will be an additional funding of £170m to save up to 55,000 hours a year of administrative time in the justice system through digitising jury bundles and new software to streamline parole decisions.
• There will be £165m funding to cut last year’s local authority overspend of £670m on children’s social care places across England by making 200 additional child social care places available, reducing the reliance on costly emergency places for children.
• £34m funding to reduce fraud by a wider AI usage across government agencies.
• Additional funding so that a least 100 MRI scanners in England are upgraded with AI with the aim to speed up cancer test results.
• Additional funding to provide more drones for police to use for such things as traffic collisions, with the aim to free up more police time to deal with serious crime and burglaries.
• There is to be a £360m investment in advanced manufacturing projects across the life sciences, automotive and aerospace sectors.
• The amount charged under the Economic Crime (Anti-Money Laundering) Levy will increase from £250,000 to £500,00 from 2024/25.