This is an initial analysis of the main measures announced by the Chancellor in today’s Budget and followed up by the publication of official press material and briefing documents. More information will emerge over the next few days and further alerts will be issued as necessary.
The Chancellor’s soundbites…
- “this is a Budget for long-term growth”.
- “we are successfully tackling inflation”.
- “no solid growth without solid finances”.
- “there is nothing compassionate about running out of money”.
- “targeted help for families will continue”.
- “Improving NHS productivity will save billions”.
- “Simpler tax system that makes work pay”.
The OBR forecasts inflation below 2% in 2 months’ time. And economy to grow by 0.8% in 2024.
Child benefit
Consultation on high income child benefit charge to come into effect from April 2026. But from April 2024, threshold raised from £50,000 to £60,000 and taper limit raised to £80,000.
National Insurance
2% cut. Employee NI to be cut from 10% to 8% and self-employed cut from 8% to 6% with effect from 6 April 2024.
Duties
Fuel and alcohol duties frozen for another 12 months.
VAT
VAT registration threshold to be increased from £85,000 to £90,000 with effect from 1 April 2024.
Full expensing
The government will seek to extend full expensing to assets for leasing when fiscal conditions allow and will publish draft legislation shortly.
R&D tax credit relief
As part of the Autumn Statement 2023 package, the government announced reforms worth £280 million a year to simplify and improve R&D tax reliefs, helping to drive innovation in the UK. To improve the functioning of the R&D tax reliefs system, HMRC will establish an expert advisory panel to support the administration of R&D reliefs. The panel will provide insights into the cutting-edge R&D occurring across key sectors such as tech and life sciences, and work with HMRC to review relevant guidance, ensuring it remains up to date and provides clarity to claimants.
New ISA
Additional £5k can be invested in a new “British ISA” focusing on UK equities and will encourage UK investment.
Furnished holiday lettings
Tax regime to be abolished in its entirety from April 2025, meaning short-term and long-term lets will be treated the same for tax purposes. Individuals with FHL and non-FHL properties will no longer need to calculate and report income separately.
Stamp Duty Land Tax (SDLT) Multiple Dwellings Relief
To be abolished in entirety from 1 June 2024. Property transactions with contracts that were exchanged on or before 6 March 2024 will continue to benefit from the relief regardless of when they complete, as will any other purchases that are completed before 1 June 2024.
Capital gains tax on property
CGT to be reduced from 28% to 24% (or 18% for any gains within the basic rate band).
Non domiciles
Abolition of the current system from 6 April 2025. To be replaced with a simpler residency-based system. There will be transitional arrangements. Under the new regime anyone who has been tax resident in the UK for more than four years will pay UK tax on their foreign income and gains, as is the case for other UK residents. This measure raises £2.7 billion in the year 2028-29. 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.
From 6 April 2025, the government will introduce a new residence-based regime specifically designed to make the UK more competitive. Individuals 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. 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.
The government is also 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
Tax avoidance
There is a new package of measures that will raise over £4.5 billion by 2028-29, including by ensuring taxpayers are supported out of tax debt faster. The government is also implementing international standards to close gaps in the tax transparency system that have emerged as a result of recent developments in financial technology and the global crypto-asset market. There will be measures to clamp down on promoters of tax avoidance, and 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. Following consultation in 2023, the government will set out next steps for tackling non-compliance in the umbrella company market shortly.
Our thoughts
Lots of rhetoric. Lots of tinkering. Much of it very niche but no doubt welcome by those industries and businesses directly affected.
The 2% cut in National Insurance was widely leaked as it is less of a fiscal drag than a cut in income tax.
We are disappointed that little has been done to simplify and/or improved the R&D tax credit fiasco that most people will be aware of. The introduction of an advisory panel to HMRC will help but this will take time to filter through and really impact how R&D claims are dealt with. Particularly disappointing is the lack of any mentioning of changing the rules on work carried on outside the UK, and many companies are going to see the value of their claims drastically reduced as a direct result of this.
A number of documents have been published today and I will be going through these over the next few days. If anything further emerges I will issue further alerts in due course.
And naturally, this summary document is an overview only. If you have any specific questions please contact me as usual.
