Budget 2024: Highlights | RRL

March 6, 2024

It was always going to be a very strange Budget as there was a general election coming up and of course that cast a big shadow over the whole budget. The Chancellor found himself in the unenviable position of being caught between the looming shadow of the election, bleak poll prospects for the Conser­v­ative Party, a very tense situation due to the poor state of public finances and bleak growth prospects, and a very difficult overall high effective tax environment. The awkwardness was compounded by ongoing signif­icant disagree­ments within the Conser­v­ative Party over the preferred direction of tax policy

Without the shadow of the general election, there probably wouldn’t have been any tax breaks — but we did have a further cut in National Insurance. At first glance it looks like a game of chance! This was accom­panied by the announcement of a freeze on public spending, which was justified by the govern­ment’s aim to create incen­tives for produc­tivity in the public sector.

However, that being said, from a purely tax perspective, it was probably the most inter­esting financial report in a number of years, with some changes that will impact many, partic­u­larly in Cornwall.

Inter­est­ingly, one signif­icant change was a “copy-and-paste” exercise of a long-held and publi­cized opposition policy.

The main tax announcements were as follows:

• 2% reduction in NIC rates — in addition to the NIC cuts announced in the Autumn Statement, the Chancellor announced a 2% reduction in the rate for Class 1 NIC employees, bringing this down to 8% (from 10%) , and a corre­sponding 2% reduction in the rate of Class 4 NIC for the self-employed from 8% to 6%.
  • There are a few things here — I think employers would have liked to see some support too, and I think this cut may be short-lived (my view would be that this would be reversed after the next general election).

• Increase in VAT regis­tration threshold — from 1 April 2024 the VAT regis­tration threshold will increase by £5,000 to £90,000 (from £85,000, which has not been increased for 7 years). The dereg­is­tration threshold will also increase by £5,000 to £88,0000.

• • While this is welcome, it simply repre­sents tinkering with a model that many see as broken. The ‘cliff edge’ nature of the threshold is a signif­icant problem — the whole concept needs to be recon­sidered in my opinion.

• Increase in the High Income Child Benefit Charge (HICBC) threshold – from 6 April 2024 the income threshold per person (if they or their partner are eligible for child benefit) will increase from £50,000 to £60,000. Another change is that the reduction threshold has been increased from £60,000 to £80,000 — meaning the actual reduction loss in child benefit will be increased to an income range above £20,000, as opposed to the previous £10,000 range. There were also announce­ments that the government would consider addressing the major issue of the income limit being assessed on an individual basis in the future — and a commitment to consider appro­priate changes in the coming years.

• • This is all welcome, but it is welcome in the context of easing the mess that is the HICBC. The charge is ridiculous in many respects and far too complex and admin­is­tra­tively burdensome (for taxpayers and HMRC) for what it is. The entire system must be considered.

• The abolition of the “Furnished Holiday Letting Scheme” — as was heavily rumored/leaked the day before the Budget (but with not nearly enough time for those affected to review and implement the plan), the Furnished Holiday Letting Scheme (FHL) and the The associated advan­tages are/are to be abolished from April 6, 2025, although anti-forestation measures apply to sales from today (presumably to secure claims for capital gains, relief from the sale of company assets — the rate of 10%).

• • This is a huge blow to owners of furnished holiday accom­mo­dation. We only have limited details at this time, but I currently have a number of questions, such as: B. what impact this will have on FHL owners who have previ­ously claimed capital allowances and whether any changes will impact the VAT position etc.

• • • FHL owners need to rethink their future position and ask themselves: whether it is profitable to continue the business, if so, how the business should be struc­tured in the future, etc.
    • FHL owners who rely on profits as “relevant income” for pension contri­bu­tions also need to rethink their strategy.
    • The draft legis­lation will be published in due course when we have further details and can provide a further update.

• Reduction in the higher capital gains tax rate on gains from residential property – it has been announced that the current higher capital gains tax rate of 28% on gains from the disposal of gains from residential property will be reduced to 24% from April 6, 2024. The lower rate will remain at 18% . The reduction is stated “Generate more trans­ac­tions in the real estate market, benefiting those looking to relocate or get on the real estate ladder.”

• • I’m skeptical about whether that’s a suffi­cient incentive. Why just reduce to 24% and maintain a 4% difference between the 20% rate for other assets? The additional admin­is­trative burden (and associated costs) that the different rates impose on HMRC must signif­i­cantly offset the slightly higher rate. A more logical step would certainly be to equalize capital gains tax rates for all assets.
  • Those in the middle of a sale process may wish to defer exchanging contracts until the new tax year, although the reduced annual capital gains tax exemption will need to be taken into account from 6 April 2024 (pre-announced to increase from the current £3,000). to reduce). £6,000).

• Extending “full cost reimbursement” for capital allowances to leased assets – it has been announced that the Government will consult on a possible extension of full cost reimbursement to leased assets, which are not currently eligible. This would be a welcome expansion for larger companies and corpo­ra­tions.

• • As we have previ­ously shared, full reimbursement will largely only make sense for larger companies or groups where the business/group uses its annual investment grant each year.

• New UK ISA – A new UK ISA has been announced with its own allowance of £5,000, which will form an additional allowance to the existing ISA allowance. The Government will consult on the details when we are expected to receive further information/details. We will update here.
• Non-UK resident regime – this is the Chancellor’s “copy and paste” job. From April 6, 2025, the current “remit­tance basis” regime for income and capital gains tax will be completely abolished and a simple system will be intro­duced.

• • Inter­est­ingly, while the above only refers to income tax and capital gains tax, the published documen­tation also states this “The government has also announced its intention to move to a residence-based regime for inher­i­tance tax and plans to publish a policy consul­tation on these changes later in the year, followed by draft technical legis­lation.” And “The government intends to move IHT to a residence-based system, subject to consul­tation and only applicable from April 6, 2025.“Changes to the UK inher­i­tance tax regime for non-UK residents would be signif­icant for those affected. As soon as the consul­tation document is published we will update it. However, we recommend that those relying on their non-UK resident status to mitigate UK inher­i­tance tax urgently review their position.

• Fuel tax frozen — current rates will be maintained for another year — the usual giveaway that is not a giveaway!
• Temporary extension of higher creative tax relief made permanent — Budget 2023 announced that the higher rates of Theater Tax Relief (TTR), Orchestra Tax Relief (OTR) and Museum and Gallery Tax Relief (MGETR) will be extended for 2 years until April 1, 2025. The rates have now been made permanent (the permanent rates as of April 1, 2025 are 5% lower than the current temporary rates generally), and the MGETR has now been made permanent (which previ­ously had an expiration date). ). Pleasing for the creative/­culture-based organi­za­tions in Cornwall who rely on the relief.
• The multi-dwelling property tax relief has been abolished — while the relief is useful for customers purchasing multiple residential properties, it has been the target of unscrupulous adjusters, resulting in fraud­ulent claims and a signif­icant number of cases in tax tribunal. The relief applies to contracts exchanged on or before today (regardless of the date of completion), but otherwise the relief will no longer be available.

• • More attention is paid to whether the purchases are residential or non-residential properties. The government confirmed it has decided not to make any changes to “mixed property purchases”, which it had previ­ously consulted on.

Tomorrow we will send another detailed analysis of all the content presented today.