Unlocking the March Budget

The budget breakdown – what were the key announcements?

TAG Accountants Group’s taxation services team listened with interest to Jeremy Hunt’s recent Budget and have provided you with the key points to consider below:

Personal tax-related announcements

Another fall in employee National Insurance contributions

Following on from the previous Autumn announcement, there is going to be a further reduction of 2%, from 10% to 8%, effective from April 2024.
Added to the previous 2% drop announced in the Autumn Statement, this means that a person earning £35,400 will be more than £900 a year better off.

Income Tax rates and allowances are unchanged

The Budget announcements did not address the fiscal drag resulting from the freezing of the Income Tax personal Allowance and the High-Income Threshold.

The Income Tax Personal Allowance (presently £12,570) and the higher rate threshold (presently £50,270) above which you will pay Income Tax at 40%, not 20%, have not seen a significant increase for over four years.

To keep pace with inflation, based on the CPI increase, a £45,000 salary in April 2020 would now need to be £55,000 to maintain the same purchasing power. As the higher rate threshold has remained unchanged, at £50,270, this effectively means £4,730 will be taxed at 40%, not 20% because of the threshold freeze.

Had thresholds remained linked to the CPI change, the Personal Allowance should be around £15,400 and the Higher Rate threshold around £61,400, which demonstrates the significant impact this has had on personal tax take.
The Income Tax Personal Allowance and Higher Rate Threshold are expected to remain unchanged until at least April 2028.

Uplift to High Income Child Benefit Charge (HICBC)

From 6 April 2024, the income threshold at which the HICBC can recover Child Benefit from parents is being increased from £50,000 to £60,000. The income banding that will affect the amount of any HICBC clawback will also be increased from £60,000 to £80,000, within which 1% of benefits received are clawed back for every £200 earned over £60,000. This means that once the highest earner’s income reaches £80,000, any Child Benefit received will have been clawed back in full.

Reduction in Capital Gains Tax (CGT) rate on UK residential property sales

The higher rate of CGT for residential property gains is being reduced from 28% to 24% from 6 April 2024. The lower rate will remain at 18% for any gains falling within an individual’s basic rate band.

Stamp Duty Land Tax (SDLT) – abolishment of Multiple Dwellings Relief (MDR)

MDR is being abolished for transactions with an effective date on or after 1 June 2024. MDR enabled SDLT relief when you bought more than one dwelling at the same time. Transitional regulations allow for MDR to be claimed for contracts exchanged on or before March 6, 2024, irrespective of the completion date, though certain exclusions apply.

Remittance basis for taxation of Non-UK Domiciled individuals abolished

The remittance basis of taxation for non-UK domiciled individuals is being abolished and replaced with a simpler residence-based regime with effect from 6 April 2025. Those who choose to participate in the regime will be exempt from UK tax on foreign income and gains during the initial four years of tax residence.

Overseas Workday Relief (OWR) will also be reformed but will continue to provide Income Tax relief for earnings from duties conducted overseas for the first three years of tax residence with restrictions on remitting these earnings removed.

It was also announced there will be a move to a residence-based regime for Inheritance Tax, with plans to publish a policy consultation on these changes, followed by draft legislation later in the year.

Restriction in scope of Agricultural Property Relief and Woodlands Relief

From April 6, 2024, Agricultural Property Relief and Woodlands Relief will only apply to property within the UK. This change means that property situated in the European Economic Area, the Channel Islands, and the Isle of Man will be treated similarly to other properties located outside the UK.

A new British ISA launched

A new British ISA with an allowance of £5,000 a year is to be introduced for investments in UK equity. Additional information about the new scheme will be disclosed later in the year.

Vaping Products Duty effective from October 2026

This new duty is currently due to take effect from 1 October 2026 alongside a proportionate increase in tobacco duties.

The levy will be imposed on liquids intended for use in vaping devices and e-cigarettes, with the following rates:

£1 per 10ml for nicotine free liquids
£2 per 10ml for liquid containing nicotine at concentrations between 0.1 to 10.9mg per ml.
£3 per 10ml for liquids containing nicotine at concentrations 11mg per ml, or above.

Furthermore, there will be a single tobacco duty increment of £2 per one hundred cigarettes or fifty grams of tobacco starting from October 1, 2026.

Alcohol Duties frozen

These duties will be frozen from 1 August 2024 until 1 February 2025, extending the six-month freeze announced last year.

Fuel Duty main rates are unchanged

The rates of Fuel Duty introduced in March 2022 will not be increased for at least a further 12 months.

Business tax-related announcements

VAT registration threshold up to £90,000

Starting from April 1, 2024, the threshold for taxable turnover, which determines whether an individual or business needs to register for VAT, will rise from £85,000 to £90,000. The threshold for taxable turnover, used to assess eligibility for deregistration, will rise from £83,000 to £88,000.

This should benefit smaller traders who are approaching the registration threshold of £85,000 but would rather not register as they are unable to pass on the 20% VAT to their customers.

NIC cuts for the self-employed

A further reduction in the Class 4 NIC paid by the self-employed will apply from 6 April 2024, resulting in a reduction from 8% of chargeable profits to 6%.

No change in Corporation Tax (CT) rates

From 1 April 2025, the rates of CT will remain unchanged, meaning the main rate will stay at 25% (taxable profits over £250,000) with the reduced small profits rate at 19% (taxable profits £50,000 or less). Profits in the range of £50,000 to £250,000 will be taxed at a marginal rate between 19% and 25%.

Abolition of the Furnished Holiday Lets (FHL) tax regime

The existing tax benefits of letting properties as short-term holiday lets is to be abolished from April 2025. The legislation, when issued is expected to include an anti-forestalling rule, effective from 6 March 2024, preventing the taxpayer from obtaining a tax advantage using unconditional contracts to obtain capital gains relief under the current FHL rules.

Support for independent filmmakers

The Independent Film Tax Credit targets films with budgets (or total core expenditure) of up to £15 million and those that attain a fresh accreditation from the British Film Institute. Eligible expenditures will be credited at a rate of 53% (capped at a maximum of 80% of the film’s total core expenditure). The highest allowable credit for a film is limited to £6.36 million in taxable credit.

The changes apply to expenditure incurred from 1 April 2024, with claims able to be submitted from 1 April 2025.

Extension of higher rates for Theatre, Orchestra, Museums, and Galleries Tax Reliefs made permanent

This change affects the permanent extension of 40%/45% (for non-touring/touring and orchestral productions respectively) headline rates of relief for Theatre Tax Relief, Orchestra Relief, and Museums and Galleries Exhibition Tax Relief and is effective from 1 April 2025.

Energy Profits Levy gets a one-year extension

The end date for the Energy Profits Levy has been extended to 31 March 2029 and is expected to raise a further £1.5 billion for the Treasury.

TAG Accountants Group is here to help

Overall, some headline-making announcements and tax cuts, but the freezing of personal tax thresholds and Corporation tax rates mean that most businesses and individuals will not feel any better off.

If you need clarity on any of these changes and how they may affect you or your business, the TAG Accountants Group team is here to help and advise you. If that is the case, please reach out to your regular contact or call 01902 783172 to schedule an appointment with one of our friendly experts at TAG Accountants Group Ltd. Alternatively, you can click HERE to contact us through our website, and we will get back to you shortly.

We look forward to speaking with you.