Spring Budget 2024

Jeremy Hunt, the Chancellor of the Exchequer, presented the Spring Budget statement on 6 March 2024.

The Budget was his last Budget statement before the forthcoming general election and included some sweeping personal tax changes including the abolition of Furnished Holiday Let tax status, changes to the Child Benefit Tax Charge and changes affecting those individuals coming to the UK and looking to claim the remittance basis of taxation.

Below is a commentary on the main tax provisions announced.

Personal tax

Child Benefit Tax Charge

The threshold at which child benefit is clawed back will increase from £50,000 to £60,000. From 2024/25, the clawback will be 1% for every £200 of additional income over the £60,000 threshold, this means that child benefit will not be lost entirely until income hits £80,000.

Under the current regime Child Benefit is clawed back at 1% for every £100 that income exceeds the threshold of £50,000 meaning the full child benefit is lost when income exceeds £60,000. These rules are based on the income of the higher earner in the household.

A possible move to a household income basis for assessment of child benefit tax charge has also been announced.

Abolition of Furnished Holiday Let status

From April 2025 Furnished Holiday Let (FHL) status will be removed, meaning the tax benefits of meeting the current FHL conditions will no longer be available. Unlike residential lets, FHLs benefit from the following tax reliefs:

• Full mortgage interest relief
• Possible capital gains tax (CGT) reliefs, such as potential for business asset disposal relief and gifts hold-over relief
• Profits qualify as relevant earnings for pension purposes
• Capital allowances available on capital expenditure on equipment and fixtures
• Unlike residential lets, profits from jointly held FHLs owned by a married couple or civil partners do not need to be split 50:50 for income tax purposes

Those potentially looking to sell a FHL in the near future may consider doing that before the changes come into effect so as to potentially benefit from the capital gains tax reliefs. Tax advice around this is essential.

Changes to Non-Dom Remittance Basis

From 6 April 2025, new rules will be introduced for Non-Dom Remittance Basis. Under the proposed changes individuals who have been non-UK resident for 10 years will be exempt from UK tax on foreign income and gains arising in the first four years of residence, and they will be able to remit those income and gains to the UK without charge in that period. After this period the individual will be liable to UK tax on their worldwide income and gain.

Non-doms who are already resident in the UK will become taxable on their foreign income and gains in full, with effect from 5 April 2025. This is unless they have become resident within the preceding four years, in which case they can also benefit from the reformed rules for the remainder of that four-year period.

There will be transitional rules for those already claiming remittance basis:

• The continued application of the remittance basis to pre-6 April 2025 foreign income and gains for individuals who have previously claimed the remittance basis
• An option for former remittance basis users to rebase the value of capital assets to 5 April 2019
• A temporary 50% exemption for the taxation of foreign income (but not capital gains) for the first year of the new regime (2025/2026) is available for those who have previously claimed the remittance basis but do not qualify under the new 4-year rules
• A two-year Temporary Repatriation Facility is available to individuals who have been taxed on the remittance basis under which they may bring previously accrued foreign income and gains into the UK at a 12% rate of tax

National Insurance

From 6 April 2024 the main rate of Class 1 NIC for employees and Class 4 NIC for self-employed persons will reduce:

• Class 1 NIC (employees) – Reduction of main rate from 8% to 6%
• Class 4 NIC (Self-employed) – Reduction of main rate from 9% to 6%

The government will also consult on how it will abolish Class 2 NIC for self-employed persons.

Capital Gains Tax (CGT)

The higher rate of CGT for residential property gains will be reduced from 28% to 24% with effect from 6 April 2024. The lower rate will remain at 18%.

Indirect taxes

The Government have announced that from 1 April 2024 the VAT registration threshold will increase from taxable turnover of £85,000 to £90,000. This threshold applies to:

• total VAT taxable turnover for the last 12 months; and
• Expected turnover in the next 30 day.

In line with this, the VAT taxable turnover level required to cancel a registration increases from £83,000 to £88,000.

If you would like to discuss any of the changes outlined above, please call your usual contact at Corrigan or email pete.edwards@corrigan.co.uk.