Spring Budget 6 March 2024

Today saw the UK Budget, possibly the last fiscal statement of this Government. Our accountants in St Albans?have?digested?the contents and summarise the practical implications of the announcements below. Of course, a Budget announcement is one thing but the burning questions are always ‘what does it mean?’ and ‘when is it effective?’

Changes For Business:

National Insurance: Main rate for employee NI cut to 8% from 6 April 2024. Class 4 NI (for self-employed) cut to 6% from same date.

Abolishing the Furnished Holiday Lettings (FHL) tax regime from 6 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.

VAT registration threshold increased from ￡85,000 to ￡90,000, and the deregistration threshold from ￡83,000 to ￡88,000, freezing them at these levels. These changes will apply from 1 April 2024.

Interest harmonisation: The VAT interest rules will change and will be similar to those that currently exist in?ITSA. The measure will make the following changes to interest payments in VAT:

• when an amount is not paid by the due date, late payment interest will be charged to the taxpayer from the date that payment was due, until the date the payment is received
• HMRC will pay repayment interest on either any overpaid tax or tax refunds (or both) due to be repaid.

Extension of the Recovery Loan Scheme (RLS) – The Recovery Loan Scheme has been renamed as the Growth Guarantee Scheme and extended until the end of March 2026. The scheme offers a 70% government guarantee on loans to SMEs of up to ￡2 million in Great Britain, and ￡1 million in Northern Ireland.

HMRC guidance on retraining tax deductibility – HMRC has published new guidance around the tax deductibility of training costs for sole traders and the self-employed. This guidance ensures that updating existing skills, maintaining pace with technological advancements, or changes in industry practices, are allowable costs when calculating taxable profits.

HMRC will establish an expert advisory panel to support the administration of R&D reliefs.

Changes For Individuals:

National Insurance: Main rate for employee NI cut to 8% from 6 April 2024. Class 4 NI cut to 6% from same date.

The High Income Child Benefit Charge (HICBC) – the threshold HICHB will be raised from?￡50,000 to ￡60,000?from April 2024. In addition, the rate at which this is charged will be halved so that Child Benefit is not withdrawn in full until individuals earn ￡80,000 or more, rather than ￡60,000. In other words for every ￡200 earned over ￡60,000 pa Child Benefit is charged back?by 1%.

UK ISA – The government will create an additional Individual Savings Account (ISA) with a ￡5,000 allowance. This would be in addition to the ￡20,000 that can be subscribed into an ISA. The government will consult on the details but the idea is that this will be an incentive to invest in UK stocks and shares.

Non-doms: 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. 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. Therefore, 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 but with current restrictions on remitting these earnings removed. This new regime will commence on 6 April 2025 and applies UK-wide.

Inheritance tax: 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, including consulting on a 10- year exemption period for new arrivals and a 10- year ‘tail-provision’ for those who leave the UK and become non-resident. No changes to IHT will take effect before 6 April 2025.

Easing the payment of Inheritance Tax before probate or confirmation: From 1 April 2024, personal representatives of estates will no longer need to have sought commercial loans to pay inheritance tax before applying to obtain a “grant on credit” from HMRC.

Transfer of Assets Abroad – The government will legislate in the Spring Finance Bill 2024 to ensure individuals cannot use a company to bypass anti-avoidance legislation, known as Transfer of Assets Abroad (ToAA) provisions, in order to avoid UK income tax. The changes will take effect for income arising to a person abroad from 6 April 2024. The measure introduces a provision that deems individuals who are participators in a close company, or a non-resident company that would be close if they were UK resident, as transferors to address situations where transfers are made by such companies.

This change will ensure that a transfer made via a company, in which the individual is an owner or has a financial interest, will be considered a ‘relevant transfer’ by that individual for the purposes of the?ToAA?legislation. The measure will not impact transactions where there is no tax avoidance purpose or where the transactions are genuine commercial transactions, as set out in s736 to s742 Income Tax Act 2007.

Changes For Property:

Capital Gains Tax (CGT): The higher rate of CGT for residential property disposals will be cut from 28% to 24%. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band. The 28% rate for residential property gains accruing to trustees and personal representatives is also decreased to 24%.

From 1 June 2024, the government is abolishing Multiple Dwellings Relief, a bulk purchase relief in the Stamp Duty Land Tax regime. 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.

Stamp Duty Land Tax: First Time Buyers’ Relief for nominee purchasers – From 6 March 2024, the rules for claiming First-Time Buyers’ Relief from Stamp Duty Land Tax in England and Northern Ireland will be amended so that individuals buying a leasehold residential property through a nominee or bare trustee will be able to claim First-Time Buyers’ Relief.

Other Changes:

Interest harmonisation and penalties for late payment and late submission: This measure introduces a new points-based penalty regime for regular tax return submission obligations, which replaces existing penalties for VAT and?ITSA.

Operative date:

• VAT customers for accounting periods beginning on or after 1 January 2023
• ITSA?customers with business or property income over ￡50,000 per year from the tax year beginning 6 April 2026
• ITSA?customers with business or property income over ￡30,000 per year from the tax year beginning 6 April 2027

For all other?ITSA?customers outside the scope of?MTD, the changes will apply after the introduction for?MTD?taxpayers. There is no late payment penalty if the taxpayer pays the tax late but within 15 days of the due date. The first penalty is set at 2% of the outstanding amount if they pay between 16 days and 30 days after the due date. If there is any tax left unpaid 30 days after the due date it is set at 2% of the outstanding amount at day 15 plus 2% of the outstanding amount at day 30.

In most instances this will amount to a 4% charge at day 30. A second late payment penalty is charged at a rate of 4% per annum, calculated on a daily basis on the total unpaid tax incurred from day 31. To avoid a penalty or penalties, the taxpayer will need to either pay or approach HMRC to agree a ‘time to pay’ arrangement.

Tax advice: The government is consulting 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. The government will also explore making it quicker and easier for tax advisers to register with HMRC.

Want to read more? The BBC have put together helpful budget 2024 information?and coverage.?

How will the budget?changes affect your business and your taxes?

As always, the devil is in the detail, and there will be a lot more detail to come out over the coming weeks.

If you have any questions, concerns or worries about any of the above changes then we recommend speaking to your friendly local accountants and tax?advisers in St Albans – Visionary Accountants.