Spring budget 2024

Spring Budget March 2024 Overview

Chancellor Jeremy Hunt has outlined a budget aimed at fostering long-term growth, with commitments to more jobs, enhanced public services, and reduced taxes.

Key highlights include additional cuts to National Insurance for employees and the self-employed, starting April 2024, and reductions in Capital Gains Tax for residential property sales.

A new initiative to boost investments in UK businesses through a new ISA allowance has also been introduced.

Highlights

Personal Tax Adjustments

  • The basic tax rate remains at 20%, with the introduction of a new 45% rate for high earners in Scotland.
  • The personal allowance is unchanged at £12,570, continuing until April 2028.

National Insurance Contributions

  • The chancellor has confirmed a 2p cut to national insurance.
  • NICs will change from 10% to 8%, for 27 million workers, from April 2024.
  • He says this is worth £450 a year to an employee on an average salary of £35,000.

Child Benefit

  • From April 2024, the threshold for the high income child benefit charge will rise to £60,000
  • The rate charged will be halved, ensuring child benefit is not completely withdrawn until an individual’s income reaches £80,000.
  • By April 2026, the charge will be assessed on the income of a household, not just an individual, broadening its scope.

Savings and Dividend Adjustments

  • A new savings allowance structure based on your income tax rate, with changes to the Dividend Allowance commencing in the 2024/25 tax year.

Pensions and Investments

  • Adjustments to the pensions tax regime, including the abolition of the Lifetime Allowance from 2024/25.
  • The limits on various ISAs remain frozen for the 2024/25 tax year.

Business VAT

  • The chancellor announced that businesses would no longer have to pay VAT if they had a turnover of less than £90,000, an increase from the previous threshold of £85,000.

Business and Employment Initiatives

  • Further cuts to Class 1 National Insurance contributions for employees and a reduction in Class 4 contributions for the self-employed.
  • The introduction of tax reliefs for businesses employing veterans and adjustments to the National Living and Minimum Wage rates.

Capital Taxes and Incentives

  • The higher rate of capital gains tax (CGT) for residential property disposals will be cut from 28% to 24% from 6 April 2024.
  • The furnished holiday lettings tax regime will be abolished from 6 April 2025.

Making Tax Digital

  • The progression of the Making Tax Digital initiative for Income Tax Self Assessment from April 2026.

Environmental and Other Measures

  • Proposed reforms to encourage sustainable farming and management of land, alongside adjustments to business rates and the VAT registration threshold.

New Duty on Vaping

  • The government is introducing a new duty on vaping and increasing tobacco duty from October 2026, raising revenue to support public services like the NHS.
  • The chancellor also reiterated the government’s intention to ban disposable vapes “as soon as possible”.

Note: This highlight summary aims to distill the main points of the budget into a straightforward and accessible format. For detailed information, we have further information below.

In the meantime, if you need advice and how these changes might affect you or your business, professional consultation is recommended.

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Personal Tax Bands & Rates

The basic rate of tax is 20%. For 2024/25 the band of income taxable at this rate is £37,700 so that the threshold at which the 40% band applies is £50,270 for those who are entitled to the full personal allowance.

The basic rate band is frozen at £37,700 until April 2028. The National Insurance contributions upper earnings limit and upper profits limit will remain aligned to the higher rate threshold at £50,270 for these tax years as well.

For 2024/25, the point at which individuals pay the additional rate of 45% is £125,140.

The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.

Scottish residents

The tax on income (other than savings and dividend income) is different for taxpayers who are resident in Scotland from that paid by taxpayers resident elsewhere in the UK.

The Scottish income tax rates and bands apply to income such as employment income, self-employed trade profits and property income.

In 2024/25 a new 45% rate will be introduced, making six income tax rates which range between 19% and 48%. Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK.

Welsh residents

Since April 2019, the Welsh Government has had the right to vary the rates of income tax payable by Welsh taxpayers (other than tax on savings and dividend income).

The UK government has reduced each of the three rates of income tax paid by Welsh taxpayers by 10 pence.

For 2024/25 the Welsh Government has set the Welsh rate of income tax at 10 pence which has been added to the reduced rates.

This means the tax payable by Welsh taxpayers is the same as that payable by English and Northern Irish taxpayers.

Personal Allowance

The income tax personal allowance is fixed at the current level until April 2028 at £12,570.

There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000. This means that there is no personal allowance where adjusted net income exceeds £125,140.

The government will increase the married couple’s allowance and blind person’s allowance for 2024/25. The marriage allowance permits certain couples to transfer £1,260 of their personal allowance to their spouse or civil partner.

Personal Taxation – Allowance/Relief2023/242024/25
Personal allowance*£12,570£12,570
Marriage/civil partners’ transferable allowance£1,260£1,260
Married couple’s/civil partners’ allowance at 10% (maximum)**£10,375£11,080
If at least one born before 6/4/35  (minimum)£4,280£10,375
Blind person’s allowance£2,870£3,070
Rent-a-room relief£7,500£7,500
Property allowance and trading allowance (each)£1,000£1,000

* Personal allowance reduced by £1 for every £2 of adjusted net income over £100,000.
** Reduced by £1 for every £2 of adjusted net income over £37,000 (£34,600 for 2023/24), until the minimum is reached.

The marriage allowance reduces the recipient’s tax bill by up to approximately £250 a year. To benefit from the marriage allowance one spouse or civil partner must normally have no income or income below the personal allowance for the year. Since the marriage allowance was first introduced there are couples who are entitled to claim but have not yet done so. It is possible to claim for all years back to 2019/20 where the entitlement conditions are met. The total tax saving for all years up until 2022/23 could be over £1,000. A claim for 2019/20 will need to be made by 5 April 2024.

Tax On Savings

Tax on savings income in the UK varies depending on the individual’s income tax band. The Savings Allowance grants a £1,000 allowance for basic rate taxpayers, and a £500 allowance for higher rate taxpayers, but additional rate taxpayers receive no allowance.

The allowance is applied to income from savings, such as interest from banks and building societies, and affects how much tax is paid on savings income exceeding the allowance. Some individuals may also be eligible for a 0% starting tax rate on savings income up to £5,000, subject to certain conditions.

Tax on Dividends

From April 2024, the UK’s Dividend Allowance will be reduced from £1,000 to £500.

Dividends exceeding this allowance will be taxed at 8.75% for basic rate. 33.75% for higher rate, and 39.35% for additional rate taxpayers.

Corporation Tax on directors’ overdrawn loan accounts remains at 33.75%. Dividends within the allowance count towards one’s income tax band, potentially affecting tax rates on dividends beyond the allowance. Dividends are considered the last income type for taxation purposes.

Pension Tax

For the tax year 2023/24, several adjustments to pension tax rules were introduced:

  • The Annual Allowance (AA) is set at £60,000.
  • For individuals with a ‘threshold income’ over £200,000, the AA reduces by £1 for every £2 of ‘adjusted income’ above £260,000, down to a minimum AA of £10,000.
  • There is no charge for exceeding the Lifetime Allowance (LA).

These limits and income levels for the AA will stay consistent into the 2024/25 tax year. Additionally, starting from 2024/25, the LA, previously set at £1,073,100, will no longer apply.

There have also been updates to clarify the tax rules regarding lump sums, death benefits, protections for existing savings, taxation of overseas pensions, transitional measures, and reporting obligations.

Individual Savings Accounts

The government has decided to maintain the current caps on Individual Savings Accounts (ISAs) at £20,000, Junior Individual Savings Accounts and Child Trust Funds at £9,000, and Lifetime Individual Savings Accounts at £4,000 (excluding the government bonus) for the 2024/25 tax year.

Furthermore, there are plans to launch a UK ISA, offering an additional ISA allowance of £5,000 on top of the existing limit. This introduces a fresh opportunity for tax-free saving, aimed at encouraging investments within the UK.

High Income Child Benefit Charge (HICBC)

The High Income Child Benefit Charge (HICBC) is a tax applied to individuals earning higher incomes who receive Child Benefit, or whose partner does. From April 2024, the UK government will raise the starting threshold for this charge from £50,000 to £60,000.

Moreover, the rate at which the HICBC is applied will be reduced; previously, it was 1% of the Child Benefit amount for every £100 earned over the threshold, but it will change to 1% for every £200. Consequently, Child Benefit will not be fully withdrawn until an individual’s ‘adjusted net income’ reaches £80,000 or more.

The government estimates 485,000 families will gain an average of £1,260 towards the cost of raising their children in 2024/25. 170,000 families will be taken out of paying the tax charge.

Furthermore, by April 2026, the government intends to assess HICBC based on household income instead of on an individual basis. A public consultation will be held to discuss this change.

Non-UK Domiciled Individuals

From 6 April 2025, the UK is changing the tax rules for individuals who live in the UK but have their permanent home (domicile) in another country, known as non-UK domiciled individuals or “non-doms”.

Currently, non-doms can choose to pay UK tax only on the foreign income and gains they bring into the UK, under what is known as the remittance basis of taxation. This will be replaced with a new system that focuses on the individual’s UK residence status.

Under the upcoming residence-based regime, if a non-dom has not been a UK tax resident for any of the last ten years and then becomes a UK tax resident, they won’t have to pay UK tax on any foreign income and gains for their first four years of living in the UK.

However, if someone has been a UK tax resident for more than four years, they will need to pay UK tax on all their foreign income and gains.

To ease the transition, the government will offer:

  • A one-time option to adjust the tax value of capital assets to their value on 5 April 2019.
  • A temporary 50% tax exemption on foreign income for the first year of the new regime (2025/26).
  • A two-year Temporary Repatriation Facility that allows for foreign income and gains to be brought into the UK at a reduced tax rate of 12%.

Furthermore, reforms will be made to Overseas Workday Relief, which applies to employment income for duties performed abroad.

The Inheritance Tax (IHT), which currently depends on an individual’s domicile status, is also set to change. The government plans to shift to a residence-based system after a period of consultation, with no changes taking effect before 6 April 2025.

This comprehensive overhaul aims to simplify the tax system for individuals who move between countries, making it more transparent and equitable by focusing on where they actually live, rather than their permanent home or domicile.

National Insurance Contributions

The Chancellor has previously announced major changes to the National Insurance contributions (NICs) system.

Employees and NICs

Following the Autumn Statement in 2023 the government cut the main rate of Class 1 employee NICs from 12% to 10% from 6 January 2024. The government has further cut the main rate of Class 1 employee NICs from 10% to 8% from 6 April 2024.

According to the government, building on changes made at the Autumn Statement the government has cut taxes again for 29 million people with the average worker on £35,400 receiving a cut in 2024/25 of over £900.

The self-employed and NICs

The self-employed generally have to pay two forms of NICs: Class 2 and Class 4.

Firstly, the government will amend Class 2 self-employed NICs from 6 April 2024. This means that, from 6 April 2024:

  • Self-employed people with profits above £6,725 will continue to get access to contributory benefits, including the State Pension, through a National Insurance credit, without paying NICs.
  • Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension will continue to be able to do so.

This will mean that a self-employed person who currently pays Class 2 NICs will save at least £192 per year.

Secondly, the government will cut the main rate of Class 4 self-employed NICs from 9% to 6% from 6 April 2024.

This will benefit around two million individuals, recognising the contribution of the self-employed to the economy and ensuring that work pays for all.
According to the government, combined with the removal of the requirement to pay Class 2 NICs, this will save an average self-employed person on £28,000 £650 a year.

Extension of NICs relief for hiring veterans

The government is extending the employer NICs relief for businesses hiring qualifying veterans for a further year from April 2024 until April 2025.

This means that employers will continue to pay no employer NICs up to annual earnings of £50,270 for the first year of a qualifying veteran’s employment in a civilian role.

National Living Wage and National Minimum Wage

The government has accepted in full the recommendations of the Low Pay Commission and announced increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from 1 April 2024.

In addition, from 1 April 2024 the NLW will be extended to 21 and 22 year olds. The rates which will apply from 1 April 2024 are as follows:

FromNLW18-2016-17Apprentices
April 1st 2024£11.44£8.60£6.40£6.40

The apprenticeship rate applies to apprentices under 19 or 19 and over in the first year of apprenticeship. The NLW applies to those aged 21 and over.

The Department for Business and Trade estimates 2.7 million workers will directly benefit from the 2024 National Living Wage increase.

Taxable Benefits for Company Cars

For company cars, the rates of tax are frozen for 2024/25, with planned increases in the following years for cars with emissions under 75g/km.

Electric cars will see a charge increase from 2% to 5% over the period. Cars with emissions of 75g/km and above will have a 1% increase in 2025/26 only, with a cap at 37%.

YearEmissions Under 75g/km IncreaseElectric Cars ChargeEmissions 75g/km and Above IncreaseFree Private Fuel Benefit
2024/25Frozen2% to 5%Frozen£27,800
2025/261%5%1% (max 37%)£27,800
2026/271%5%Frozen£27,800
2027/281%5%Frozen£27,800

Company Vans Taxable Benefits

For the tax year 2024/25, the benefit for company vans remains at £3,960 per van, and the van fuel benefit charge for private use remains at £757.

Vans that cannot emit CO2 under any circumstances have a cash equivalent benefit of nil. ​​

YearVan BenefitVan Fuel BenefitCO2 Emission Condition
2024/25£3,960£757Nil for zero-emission vans

Corporation Tax Rates

The government has decided to keep the Corporation Tax rates unchanged, meaning companies with profits over £250,000 will continue to be taxed at a 25% rate.

The small profits rate of 19% applies to companies with profits of £50,000 or less. For companies with profits falling between £50,001 and £250,000, the tax rate will be between 19% and 25%, adjusted by a marginal relief to ensure a gradual increase in the effective tax rate.

Profit RangeCorporation Tax RateDescription
£0 – £50,00019%Small profits rate payable by companies.
£50,001 – £250,00019% – 25% (marginal relief applies)Main rate reduced by a marginal relief, providing a gradual increase in the effective Corporation Tax rate.
Over £250,00025%Main rate payable by companies with profits over £250,000.

Capital Allowances

This table outlines the capital allowances available to businesses for investing in plant and machinery, including the Full Expensing and Annual Investment Allowance, their rates or financial limits, qualifying expenditures, applicable periods, and additional notes.

The government has made both the Full Expensing rules and the 50% rate for integral features and long-life assets permanent, as announced in the Autumn Statement 2023. Additionally, the AIA remains at £1 million, with potential considerations for an extension to include plant and machinery for leasing. ​​

Allowance TypeRate/AmountQualifying ExpenditurePeriodNotes
Full Expensing100%Qualifying expenditure on most plant and machinery (excluding cars), unused and not second-hand.Originally for expenditure incurred on or after 1 April 2023 but before 1 April 2026, now permanent.N/A
Integral Features & Long Life Assets50%Applies to integral features and long life assets.Now permanent as announced in the Autumn Statement 2023.N/A
Annual Investment Allowance (AIA)£1 millionAvailable to both incorporated and unincorporated businesses on certain types of plant and machinery.Remains at £1 million per 12-month period.Government to publish draft legislation for consultation on potential extension for plant and machinery for leasing.

Transfer of assets abroad – anti-avoidance legislation

The Transfer of Assets Abroad (ToAA) provisions will be amended so that UK resident individuals cannot bypass the legislation, by using a company to transfer assets offshore in order to avoid tax.

Transfers of assets by certain companies will be considered a relevant transfer for the purposes of the legislation. The new measure will apply to income arising to persons abroad on or after 6 April 2024.

Creative Industries

This table outlines the support available under the AVEC, providing a basic credit of 34% for qualifying expenditures, and introduces the new UK Independent Film Tax Credit (IFTC), offering an increased credit rate of 53% for qualifying UK independent films with budgets of £15 million or less.

The IFTC includes a cap on qualifying expenditure at 80% of the film’s total core expenditure and specifies that qualifying films must start principal photography on or after 1 April 2024, with claims being accepted from 1 April 2025.

Support TypeCredit RateQualifying CriteriaEffective Date
Audio-Visual Expenditure Credit (AVEC)34%Basic credit for qualifying expenditure.N/A
UK Independent Film Tax Credit (IFTC)53%For UK independent films with a budget of £15 million or less. Qualifying expenditure capped at 80% of the film’s total core expenditure.Qualifying films must commence principal photography on or after 1 April 2024. Claims can be made from 1 April 2025.

The maximum IFTC claim will be £6,360,000.

Separately, from 1 April 2025, companies with qualifying visual effects costs will be able to claim an increased AVEC of 39%, a 5% increase on the basic credit. The 80% cap will also be removed for qualifying visual effects costs.

For Theatre Tax Relief, Orchestra Tax Relief and Museums and Galleries Tax Relief, the temporary rates of 40%/45% for non-touring/touring and orchestral productions will be made permanent from 1 April 2025.

Furnished Holiday Lettings

The Furnished Holiday Lettings (FHL) tax regime will be abolished from April 2025. Draft legislation is to be published and will include anti-forestalling measures that will apply from 6 March 2024.

The effect of abolishing the rules will be that short-term furnished holiday lets and longer-term residential lets are treated the same for tax purposes and individuals will no longer need to report the two income streams separately.

Research and Development Relief

As announced in the Autumn Statement 2023, the existing Research and Development Expenditure Credit (RDEC) and SME schemes will be merged, with expenditure incurred in accounting periods beginning on or after 1 April 2024 being claimed in the merged scheme. The rate under the merged scheme will be set at the current RDEC rate of 20%.

The changes also provide additional relief for loss-making Research and Development (R&D) intensive SMEs through a higher rate of payable tax credit from April 2023, as a feature of the existing SME scheme. Those entitled to this higher rate would, from April 2024, continue to claim under rules similar to the current SME scheme rather than under the new RDEC scheme.

A number of other changes will apply to the new regime from April 2024, including that R&D claimants will no longer be able to nominate a third-party payee for R&D tax credit payments, subject to limited exceptions.

Further action may be needed to reduce the unacceptably high levels of non-compliance with the R&D rules and HMRC will be publishing a compliance action plan.

Making Tax Digital for income tax

The government has announced the outcome of the review into the impact of Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) on small businesses and intends to proceed with implementation from April 2026.

The government will also ensure taxpayers who join MTD from 6 April 2024 are subject to the government’s new penalty regime for the late filing of tax returns and late payment of tax.

Business Rates

The small business multiplier will be frozen for another year, while the 75% Retail, Hospitality and Leisure relief will be extended for 2024/25.

The standard multiplier will be uprated in line with the Consumer Prices Index for September 2023. These changes will take effect from 1 April 2024 in England.

Freeports and Investment Zones

Both regimes allow businesses in specific locations to benefit from a number of reliefs including Stamp Duty Land Tax relief, enhanced capital allowances, structures and buildings allowances and secondary Class 1 NIC relief for eligible employers.

As announced in the Autumn Statement 2023, the government will extend the window to claim the tax reliefs available in Freeport special tax sites from five to ten years. The extension to the sunset dates will be enacted by secondary legislation and have been confirmed as:

  • 30 September 2031 for special tax sites in respect of English Freeports.
  • 30 September 2034 for special tax sites in respect of Scottish Green Freeports and Welsh Freeports.

Capital Gains Tax Rates

This table illustrates that while the standard CGT rate remains unchanged between the two tax years, there is a reduction in the higher CGT rates on chargeable gains for residential properties from 28% to 24% in 2024/25.

Additionally, the CGT annual exempt amount will be halved from £6,000 to £3,000 starting from 6 April 2024. The rates for Business Asset Disposal Relief and Investors’ Relief remain at 10% on gains up to their respective thresholds.

Tax Feature2023/24 Rates2024/25 Rates
Standard CGT Rate10% (basic rate band available), 20% thereafter10% (basic rate band available), 20% thereafter
Higher CGT Rate on Residential Properties (Excluding Private Residence Relief)18% and 28%18% and 24%
Business Asset Disposal Relief10% on gains up to £1 million10% on gains up to £1 million
Investors’ Relief10% on gains up to £10 million10% on gains up to £10 million
CGT Annual Exempt Amount£6,000£3,000

Inheritance Tax nil rate bands

Despite much speculation before the Budget, Inheritance Tax (IHT) has not been abolished. The nil rate band has been frozen at £325,000 since 2009 and this will now continue up to 5 April 2028.

An additional nil rate band, called the ‘residence nil rate band’ is also frozen at the current £175,000 level until 5 April 2028.

Changes to Agricultural Property Relief and Woodlands Relief

To ensure compatibility with EU law, action was taken many years ago to expand the scope of Agricultural Property Relief (APR) and Woodlands Relief to property located in the European Economic Area.

Following Brexit, this measure reverses those changes and also removes APR from property in the Channel Islands and Isle of Man. Broadly, the changes take effect from 6 April 2024.

Environmental land management and ecosystem service markets

The government is undertaking significant reform of agricultural policy and spending in England.

At Budget 2023, the government published a consultation exploring elements of the tax treatment of environmental land management and ecosystem service markets. Following consideration of the responses, the government has decided:

  • To extend the existing scope of APR from 6 April 2025 to land managed under an environmental agreement with, or on behalf of, the UK government, Devolved Administrations, public bodies, local authorities, or approved responsible bodies and
  • Not to restrict APR to tenancies of at least eight years.

The VAT registration threshold

After many years of having been frozen, the government will increase the VAT registration threshold from £85,000 to £90,000 and the de-registration threshold from £83,000 to £88,000 from 1 April 2024.

The government has stated that these new thresholds will be frozen but has not stated for how long.

Stamp Duty Land Tax changes

A number of changes are made to the Stamp Duty Land Tax (SDLT) regime. These include the following:

  • The abolition of Multiple Dwellings Relief, broadly from 1 June 2024 but subject to transitional rules, for purchasers of residential property in England and Northern Ireland.
  • Changes to First-Time Buyer Relief to extend it to individuals buying a new residential lease via a nominee or bare trust for transactions with an effective date (usually the date of completion) on or after 6 March 2024, but subject to transitional rules.
  • Public bodies in England and Northern Ireland will be removed from the scope of the 15% SDLT higher rate charge where the effective date of transaction (usually the date of completion) is on or after 6 March 2024.

Tax Simplification Measures

The government has announced a package of measures that supports its ambition to simplify and modernise the tax system, which includes the following:

  • To simplify the process for employees claiming tax relief on their expenses, and for HMRC to automatically process claims, the government is designing a new, online service for employees to claim tax relief on all of their expenses in one place.
  • The government will mandate the reporting and paying of income tax and Class 1A NICs on benefits in kind via payroll software from April 2026.
  • The government will legislate to introduce a route for people to apply for National Insurance Credits for parents and carers for tax years where they have not claimed Child Benefit, to ensure that people do not miss out on their State Pension entitlement.

Other Changes

  • The alcohol duty freeze will be extended until February 2025.
  • The temporary 5p cut in fuel duty rates will be extended until March 2025 and the planned inflation increase for 2024/25 will not take place.
  • A new duty on vaping products will be introduced from 1 October 2026.
  • The government will also introduce a one-off tobacco duty increase from the same date.
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