UK Spring Budget 2024
Employment tax
UK Spring Budget 2024
Wed 24 Apr 2024
The UK Spring Budget on 6 March 2024 was relatively measured in its tax policy decisions, despite a background of falling inflation and rising tax receipts. Below are some areas of interest for globally mobile individuals, those with UK staff, and those with business and investment interests.
Main measures affecting individuals
- National insurance contributions (NIC) rates paid by employees and the self-employed with annual taxable income below £50,270 will fall by 2%, saving a maximum of £754. As NIC is dealt with centrally, this reduction will apply across the UK, bypassing regional responsibilities for income tax. The 5p temporary cut in fuel duty rates will be extended to March 2025 and there will be no inflationary increase in fuel duty rates for 2024/25. Though this is helpful for workers they remain adversely impacted by frozen income tax thresholds.
- Employers may need to review their staff remuneration arrangements and employee expense policies in the light of these changes.
- A change to the taxation of foreign individuals who are UK resident but not UK domiciled from 6 April 2025 was announced. The current ‘remittance basis regime taxes foreign income and gains if remitted to the UK, subject to the payment of an annual charge of up to £60k depending on the length of UK residence. The new regime will provide for no charge on foreign income and gains arising in the first four years of UK residence, provided the individual has not been UK resident in the previous 10 years.
- Transitional rules apply for those currently using the remittance basis. These could reduce the incidence of tax on foreign income and gains in 2025/26 and also on foreign income and gains arising before April 2025 that are remitted before April 2027. There will also be refinements to ‘overseas work-day relief’, which excludes earnings for work performed outside the UK from UK income tax for the first three years of UK residence.
- In addition, there will be consultation on moving the inheritance tax (IHT) basis for ‘non-UK domiciled individuals. From April 2025 IHT will apply on an individual’s worldwide assets where they have been UK resident for a ten-year period, with no reference to UK domicile. Transitional rules will, amongst other things, affect how trusts are dealt with, depending on whether they are set up before or after April 2025 and whether settlor interested or not.
- There are a number of considerations for both UK and non-UK domiciled individuals, including UK residence status, assessing options under current rules, when to plan for realisation of income and gains, and the impact on any existing or new trusts.
- These changes will affect employers with a globally mobile workforce, as well as those individuals considering coming to, or leaving, the UK.
Main measures affecting those with property interests
- The furnished holiday lettings regime, which treats certain holiday letting with more favourable trading income tax treatment in contrast to more restrictive investment business taxation, will cease in April 2025. The CGT rate for individuals disposing of UK residential property interests will drop from 28% to 24% from April 2024.
- The multiple dwellings relief’ reducing stamp duty land tax rates will cease to be available in England and Northern Ireland from 1 June 2024, with transitional provisions for contracts entered into before 6 March 2024. Government figures indicated this relief did not significantly improve residential property investment, though we understand those in the property investment sector may have different views.
Main measures affecting other business and investment
- From a business perspective there was a commitment to introduce full expensing (available for companies) for plant or machinery intended for leasing when fiscal conditions permit.
- The temporary energy profits levy applying an additional 35% tax to oil & gas activities, will be extended a further year to March 2029.
- A new independent film tax credit will be available from April 2024 for films with production budgets (excluding marketing and distribution) of up to £15 million. The films will also need one of the following: a UK writer; a UK director; or be certified as an official UK co-production.
- There will be five further investment zones with enhanced tax reliefs for businesses in: Greater Manchester; Liverpool; North East England; South Yorkshire; West Midlands and Tees Valley.
- Subject to further discussion with stakeholders, a new ‘reserved investor fund’ structure will be made available, to facilitate low-cost institutional investment in UK property (for those investing in excess of £1m).
- A range of other government funds available for investment in particular sectors and arrangements designed to improve liquidity for investors in high growth companies were also announced.
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