According to the OBR (Office for Budget Responsibility), the policies set out in the Spring Budget are expected to increase the economy by 0.7% by 2028/29.
Over the last few years the Government’s focus has been on reducing inflation, encouraging economic growth and cutting down on debt.
You’ll have likely seen the headlines about National Insurance cuts, child benefit changes and holiday lettings tax. We’ll give you a breakdown of all of that and more.
The Budget begins by setting out the Government’s economic achievements:
- Inflation has fallen from 11.1% to 4%, with policies set out in the budget reducing inflation for 2024/25
- The inflation rate is expected to fall to 2% by the second quarter in 2024. This is a year earlier than first predicted
- With inflation falling, wages are rising. The OBR forecasts 0.8% growth in disposable income for 2023/24 and expects this to continue
- Public sector net borrowing is estimated at £96.6 billion which is £9.2 billion lower than expected by the OBR. This is in part due to the fall in inflation, resulting in less interest costs.
TAX CHANGES
National Insurance Cuts
Back in January, the Chancellor announced a 2 percent cut to the National Insurance rate for employees – reducing it from 12% to 10%. From 6th April 2024, this will reduce by another 2 percent, from 10% to 8%.
For those who are self-employed, there is a further cut to Class 4 contributions, reducing the rate from 9% to 6%.
The government has also abolished the requirement to pay Class 2 contributions in order to simplify tax, although the details of this haven’t been fully clarified. The government say they’ll provide more information later this year. Those still wanting to make voluntary contributions are still able to do so.
- According to the government, someone on the average wage now has the ‘lowest tax effective personal tax rate since 1975’
- NI cuts aim to increase the number of working hours, which in turn boosts the economy
The budget states: “The tax system should be fair, simple, and reward hard work. At the moment, if you are of working age and get your income from having a job, you pay both National Insurance contributions (NICs) and income tax. If you get your income from other 2 sources you only pay income tax. Reducing employee and self-employed National Insurance is the best way to target working people, supporting growth and making the tax system fairer”.
High Income Child Benefit Charge (HICBC)
The government will increase the HICBC threshold from £50,000 to £60,000.
Currently, the child benefit system is based on individual incomes within a household.
For example:
–Household A: a household with 2 individuals earning below the threshold, but have a higher combined income than Household B, are eligible to receive child benefit.
–Household B: a household with 1 individual, whose earnings are over the benefit threshold, but have a lower overall income than household A, won’t be entitled to receive child benefit.
The Government has committed to move to a fairer system, based on household income, by April 2026 and will be providing further details in due course.
Capital Gains Tax
- The higher rate of Capital Gains Tax will be cut from 28% to 24%
- The lower rate will remain at 18%
The treasury document for the Spring Budget states, “This will encourage landlords and second home-owners to sell their properties, making more available for a variety of buyers including those looking to get on the housing ladder for the first time, while also raising revenue over the forecast period. Private Residence Relief will remain in place, meaning the vast majority of residential property disposals will pay no CGT”.
Furnished Holiday Lettings tax abolished
From April 2025, The Furnished Holiday Lets (FHL) tax scheme will be abolished. The scheme currently provides tax benefits to landlords, different to that of long-term lets.
The aims of this change are:
- To simplify tax, with short and long-term lets now under the same tax rules
- An expectation that landlords will sell/be dissuaded from buying properties for short-term lets, thereby providing more properties for local people to purchase or to rent long-term
Multiple Dwellings Relief abolished
- Stamp Duty Land Tax relief for multiple dwellings will be stopped from 1st June 2024
It was originally set up to support investment into the private rental sector, where those purchasing more than one dwelling could claim tax relief. - Properties exchanged on or before 6th March 2024 will still be able to claim relief, regardless of when they complete
- Other property purchases completing before 1st June 2024 will still also be able to claim the relief
Abolishing tax rules for non-UK domiciled individuals
The new policy means that if you’re a UK tax resident for more than four years, you’ll have to pay UK tax on money you make abroad. The new regime aims to simplify tax rules and to encourage people away from keeping assets and income offshore.
For those affected by this change, the government is providing transitional arrangements. This includes:
- Option to rebase the value of capital assets to 5 April 2019
- Temporary 50% exemption for the taxation of foreign income for the first year of the new regime (2025-26)
- A Temporary Repatriation Facility will be offered to allow individuals to bring previously accrued foreign income and gains into the UK at a reduced tax rate
From April 6, 2025, a new residence-based regime will be introduced, aiming to enhance the UK’s competitiveness. Under this regime, individuals will not pay UK tax on any foreign income and gains in their first four years of tax residency, provided they have not been a tax resident in the UK in the previous 10 years. Those eligible will be able to claim Overseas Workday Relief during their first three years of tax residence.
The government also announced plans to move to a residence-based regime for Inheritance Tax, but no changes are to be made before April 2025.
Government to maintain fuel duty rates for 12 months
- Fuel duty rates will remain at the same levels for the next 12 months
- The government had planned to increase costs in line with inflation but have decided to provide extra support instead
- On average, this will save you £50 per year
Alcohol duty freeze
- The government has scrapped a planned increase on alcohol duty and instead has prolonged the duty freeze from 1 August 2024 until 1 February 2025
Increase on tobacco and vaping duty
- From October 2026, a new vaping duty will come into effect
- Tobacco duty to also increase from October 2026
- Revenue from this will be used to fund public services, such as the NHS
Energy Profits Levy (EPL)
With oil and gas prices having risen drastically over the last few years, The Energy Profits Levy was introduced to make sure that energy companies pay a fair share of tax on their profits. Prices aren’t forecast to drop before 2028/29, so the government has extended the levy until March 2029.
Debt Relief Order
- As of 6th April 2024, the administration fee when applying for a Debt Relief Order will be removed
SUPPORT & CHANGES FOR BUSINESSES
- Extension to to 75% business rate relief for eligible retail, hospitality and leisure properties for 2024/25
- As of 1st April 2024, the VAT registration threshold will increase from £85,000 to £90,000 and the VAT de-registration will increase to £88,000. This will cut business costs and encourage growth for SMEs (small and medium-sized enterprises)
Creative Industries
- £1 billion of new tax reliefs for the UK’s world-leading creative industries
- 40% relief from business rates for eligible film studios in England for the next 10 years
- A new UK Independent Film Tax Credit
- Increasing the rate of tax credit by 5%
- Removing the 80% cap for visual effects costs in the Audio-Visual Expenditure Credit
- From 1st April 2025, a permanent extension will be made to tax relief for theatres, orchestras, museums and galleries This will be set at 45%/40% for theatres, museums and galleries’ touring/non-touring productions and at 45% for orchestras
- £26 million of funding will be provided to upgrade the National Theatre’s stages and infrastructure
- National Film and Television School (NFTS) funding to enable it to offer 200 new apprenticeship places per year
Advanced Manufacturing
- £4.5 billion funding package for strategic manufacturing sectors
- Sectors include: auto, aero, life sciences and clean energy
- £2 billion for the automotive industry
- £975 million for aerospace, available for five years from 2025
Green Industries
- £120 million for the Green Industries Growth Accelerator
- Over £1 billion towards the UK’s renewable energy sector
Digital Technology and AI
- Government introducing £7.4 million upskilling fund pilot for SMEs to develop AI skills
- Aim is to unlock new opportunities that AI offers
- Upcoming SME Digital Adoption Taskforce to support SMEs in adopting digital technology and boost productivity
PUBLIC SECTOR
Public Sector Productivity Programme
The aim of the programme is to provide additional support and funding to key public sectors, focusing on ‘targeted investment’ to reform services, rather than just providing more money.
The government announced:
- £3.4 billion funding into an NHS productivity plan
According to the paper “This will double investment in NHS technological and digital transformation, including to upgrade vital MRI scanners, roll out universal electronic patient records and reduce the time frontline workers spend on administrative tasks.” - £2.5 billion ‘day-to day’ funding to the NHS
- £800 million for wider public services, including schools, defence, justice, police and transport departments
OTHER CHANGES
Investment in HMRC digital services
- By September 2025, improvements will be made to the HMRCs digital system making it simpler for Income Tax Self Assessment taxpayers to pay their tax in instalments or in advance
British Saving Bonds
- National Savings & Investments (NS&I) to launch a product with guaranteed interest rate fixed for 3 years
- Product aims to channel more investment into UK equities
- Available in early April 2024
New UK ISA
- Government plans to create a new Individual Savings Account (ISA)
- This new ISA will have £5,000 allowance in addition to existing £20,000 limit
- Further details to be confirmed
Childcare
Changes to childcare announced in 2023 are to be phased in, beginning from April 2024. Eligible working parents of 2 year olds will be entitled to 15 hours of free from April.
From September 2024, this will be extended to eligible working parents of children aged 9months up to 3 years old.
For more information, see here.
Further to this:
- An additional investment into childcare of £500 million over the next 2 years
- Hourly rate for funded hours to increase
Household Support Fund
The Household Support Fund, which supports households struggling with essential living costs, has been extended from April to September 2024. An additional £500 million has been allocated to the fund.
For information on your local service, click here.
Further Reading
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