In the Spring Budget, Chancellor Jeremy Hunt announced additional reductions in National Insurance Contributions (NICs) effective from April 6, 2024. Employees and self-employed individuals will benefit from a 2% cut in NIC rates, bringing Class 1 NICs down to 8% from 10%, and Class 4 NICs to 6% from 9%.
Furthermore, Hunt introduced measures to lessen the tax load on various groups. Capital gains tax for residential property sales was decreased to 24% from 28%, while the VAT registration threshold was raised to £90,000, exempting 28,000 businesses from registration.
Both fuel and alcohol duties will be frozen for the fiscal year 2024/25.
The budget also introduced a new UK ISA with a £5,000 allowance, on top of the existing £20,000 ISA limit, to encourage investment in UK assets.
To finance these cuts, the Chancellor repealed the Furnished Holiday Lettings regime and Multiple Dwellings Relief, introduced a vape duty, increased tobacco duty, and adjusted Air Passenger Duty rates for non-economy passengers. The Energy Profits Levy on oil and gas companies was extended until March 2029 due to projected high gas prices.
The abolishment of the Furnished Holiday Lettings regime from April 2025 will see the tax advantages provided to these landlords eliminated. This move aims to incentivise the provision of properties to long-term renters instead. The termination of this scheme marks a significant shift for those operating holiday rental businesses, influencing the feasibility of investing in holiday rental properties. The benefits phased out include capital allowance for furnishings, the preferential 10% capital gains tax rate on sale, roll over relief, and the deductibility of mortgage interest.
The high income child benefit charge (HICBC) is often criticised for its inefficiency, as it requires families to repay child benefit when any parent earns above £50,000. Critics argue that its assessment on individual rather than combined family income is inequitable. To address this, starting April 2026, the HICBC will be modified to consider household income. Meanwhile, from April 6, 2024, the income threshold for the HICBC will be raised to £60,000, offering temporary relief.
Lastly, a new tax regime for non-UK domiciled individuals will start on April 6, 2025, expected to generate £2.7 billion in revenue. This regime offers a tax exemption on foreign income and gains for the first four years of UK residency, with transitional arrangements for current non-domiciled residents.
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