Budget 2024

From April 2025, the government have confirmed that they will abolish the Furnished Holiday Lettings (‘FHL’) tax regime. Furnished residential properties in the UK or EEA let commercially could potentially qualify for the regime.

FHL’s currently qualify for capital allowances on furnishings, equipment and fixtures, whereas normal residential investment properties do not. In the absence of the FHL regime, capital allowances will no longer be available to be claimed to reduce profits made by the property let.

Furthermore, interest payable on mortgages in respect of an FHL is currently fully deductible in arriving at the profit generated by the property let. In the removal of the FHL regime, interest will only be eligible for basic rate tax relief, as with other rental properties.

Individuals owning FHL’s can currently claim Capital Gains Tax reliefs such as Rollover Relief (to defer a gain on the FHL and ‘roll’ this over into a new asset), Business Asset Disposal relief (a 10% capital gains tax rate) and holdover relief (a relief when gifting/transferring an asset at undervalue).

Similarly, the trading status of Companies owning FHL’s will be impacted for reliefs such as business asset disposal relief and holdover relief.

The government have confirmed that draft legislation will be published in due course including anti-forestalling rules.

The Chancellor announced that the higher rate of capital gains tax for sales of residential property will be reduced from 28% to 24%. The new rate will take effect from 6 April 2024. The basic rate for gains on disposals of residential property will remain at 18%.

Other Capital Gains Tax rates will remain the same, being 10% and 20% for gains at basic and higher rate respectively. While the residential property Capital Gains Tax rate remains significantly higher than these, today’s reduction will no doubt be welcomed by landlords.

As previously announced, the Capital Gains Tax annual exemption will reduce to £3,000 with effect from 6 April 2024 (down from £6,000 in 2023/24 and £12,300 in 2022/23).

Multiple Dwellings relief applies to purchases involving more than one dwelling (e.g. a block of flats).  It allowed the SDLT to be calculated on the average consideration per dwelling rather than the total consideration paid.  This could provide a significant saving for the purchaser.

This is being abolished for any purchases completing on or after 1 June 2024.  Where exchange has occurred prior to 6 March then this deadline does not apply, but that is unlikely to impact on many purchases.

The impact of this change will increase the SDLT liability on purchases involving multiple dwellings. However, it is important to remember that if the transaction contains six or more dwellings (back to the block of flats example) then the lower commercial rates of SDLT can apply.

Over recent months the topic of non-doms has become more and more present within the media.  This status applies to individuals who live in the UK and are present here sufficient days each year to be UK resident but have their “home” overseas.

Non-dom individuals therefore pay UK taxes on their UK income and gains, but their foreign income and gains (FIGs) are not subject to UK tax when they arise but are instead taxable when brought to the UK under the remittance basis.

Jeremy Hunt, has today announced the end of this differing tax treatment for non-doms, and a system instead based solely on residency.

From 6 April 2025, new arrivals to the UK, who have been non-UK resident for the 10 consecutive years prior to moving to the UK, will not be taxable on their FIGs in the UK for their first 4 years of UK residency.  If this claim is made, they will not be entitled to the tax free personal allowance or Capital Gains Tax annual exemption for the years of the claim.

For non-doms already in the UK before 6 April 2025 there will be transitional rules depending on their circumstances:

• If they are within the first 4 years of moving to the UK, and would qualify under the new regime, they will not be chargeable to UK tax on their FIGs for the remaining period up to the end of the 4^th year from moving to the UK.

• For those who have been in the UK for over 4 years and claimed the remittance basis, a temporary 50% reduction in the amount of personal foreign income subject to tax in 2025-26. 

• Re-basing of capital assets to 5 April 2019 value for disposals that take place after 6 April 2025 for current non-doms who have claimed the remittance basis. This means that when foreign assets are disposed of, affected individuals can elect to be taxed only on capital gains since that date.

For individuals that have been taxed on the remittance basis previously, their unremitted FIGs from before 6 April 2025 will still be taxable in the UK at the point they are remitted.  A Temporary Repatriation Facility is being set up so that remittances brought to the UK between 6 April 2025 and 5 April 2027 will be taxed at a rate of 12%.

Domicile, does not only impact on the taxation of income and gains, but is the starting point for liability to Inheritance Tax (IHT).  A non-dom is currently only subject to IHT on their UK assets.  Where a non-dom individual has been present in the UK for 15 of the last 20 years then they are deemed to be UK domiciled for IHT purposes. 

The Government will be consulting on how to change the scope of IHT to be based solely on residency and no longer on domicile.  This is intended to be introduced from 6 April 2025.  The current proposal is for the worldwide assets of a person to be within the scope of IHT once they have been resident in the UK for 10 years, with a tail to apply for a period after they have left the UK.

Trusts are also subject to IHT and this is currently based on the domicile position of the settlor on the date the trust is created or assets settled to the trust.  This is also planned to be amended to be based on the residency test applied to the settlor.  This may, although not yet confirmed, also consider the position of the settlor on the date of trust’s 10 years charges and on assets leaving the trust, rather than solely on creation of the trust.

This could be concerning for trusts that are already in existence, however, it has been confirmed that the treatment of non-UK assets settled by a non-UK domiciled settlor and became comprised in a settlement prior to 6 April 2025 will not change providing certain rules are met.

Non-dom taxation is a complicated area and the above changes and transitional rules may require changes in current planning, and potentially opportunities to be considered.  We will be contacting our impacted clients regarding these changes and as the draft legislation becomes available.  We will also be releasing a more detailed article in the coming days.

Currently, you have been able to put £20,000 per tax year into an ISA. This allowance is a total across all ISA accounts you hold. The Spring 2024 budget confirmed that a new “British ISA” will be introduced for you to invest solely in British equities. Even if you have reached your £20,000 cap, you can invest an additional £5,000 in a British ISA, bringing your total ISA savings limit to £25,000 for the tax year.

The government’s goal with this new ISA is to encourage investing savings onshore rather than in foreign equities to promote growth within the British economy.  Further details on this new UK ISA will be released once the government has consulted further on the matter.

The main rate of Class 1 National Insurance is set to be reduced by two percentage points from 10% to 8% at the start of the new tax year on 6 April 2024. The main rate of Class 1 National Insurance is paid by employees on earnings between £12,570 and £50,270. This follows a previous cut from 12% to 10% in January.

Changes are also set to be made to the rate of Class 4 National Insurance, which currently payable by self-employed individuals at a rate of 9% on profits falling between the £12,570 and £50,270 thresholds. This rate was already set to be reduced to 8% as announced by the Chancellor during the Autumn statement, however it will now be reduced by a further two percentage points to 6% from April 2024.

The government announced in their Spring Budget changes to the thresholds for how the High Income Child Benefit charge is applied.

From 6 April 2024, if your adjusted net income was £60,000 or lower, the High Income Child Benefit charge would not apply.  If your adjusted net income exceeds £80,000 during the 2024/25 tax year, then any Child Benefit received will need to be repaid to HMRC in full and reported through your Self-Assessment tax return. If your adjusted net income were to fall between £60,000 - £80,000, 1% of the Child Benefit received would be due to be repaid for every £200 in excess of £60,000.

Please note that it is the taxpayer with the higher income for the year who is liable to pay the tax and it includes claims for all children living with you.

In the Autumn Statement last year, the Chancellor announced that the ‘Full Expensing’ capital allowance regime, which was introduced in the 2023 spring budget as a temporary measure, would be made permanent. Today, he said that this had provided “a £10 billion tax cut for businesses” and noted his intention to expand the scheme.

Full Expensing is a capital allowance available to companies only, which provides 100% tax relief on purchases of qualifying plant and machinery, or 50% relief for ‘special rate expenditure.’ One key advantage is that, unlike the Annual Investment Allowance which also provides 100% relief, there is no annual limit on the amount of expenditure that can qualify, meaning that larger investment projects can also benefit. However, one of the drawbacks is that, unlike the AIA, Full Expensing cannot be claimed on assets the company leases out which it does not use in its own trade.

Today the Chancellor announced his intention to extend the Full Expensing rules to leased assets, but said that this would only take place when it is ‘affordable’. He noted that draft legislation would shortly be published for technical consultation. With the prospect of a general election and a potential change in administration later this year, it remains to be seen whether his intention to expand the rules will ever be fulfilled.

For further details about Full Expensing, including the types of assets that qualify for the allowance, and when it should be claimed, please see our article here: What is Full Expensing and when should you claim it?

• The government will introduce legislation in the Spring Finance Bill 2024 to provide additional support for independent films via the ‘Audio- Visual Expenditure Credit’.

• From 6 April 2025, agricultural property relief, an inheritance tax relief, will be extended to environmental land management. Relief will be available for land managed under an environmental agreement with, or on behalf of, the UK government and other bodies. This includes agreements in place on or after 6 March 2024. The government will also be considering solutions that provide clarity on the tax treatment of the production and sale of ecosystem service credits and associated units.

• The government will introduce legislation in Spring Finance Bill 2024 so that individuals cannot bypass anti-avoidance legislation, the Transfer of Assets Abroad provisions, by using a company to transfer assets offshore in order to avoid tax. This applies to individuals who are resident in the UK. The changes will take effect for income arising to a person abroad from 6 April 2024.

• R&D - In the Autumn statement it was confirmed that an RDEC scheme will apply to all companies regardless of their size. Rather than SMEs claiming the more generous ‘enhanced expenditure’ deduction, they will now also claim an ‘above the line’ credit, which is effectively a taxable credit based on 20% of R&D expenditure.

• As previously announced, from 1 April 2023, only those companies with taxable profits of up to £50,000 or less will be eligible for the 19% corporation tax rate. Companies with profits in excess of £50,000 will pay an effective tax rate of 26.5% on the slice of profits between £50,000 and £250,000 and 25% on profits of £250,000 and over.

• For accounting periods beginning on or after 1 April 2023, the related 51% group company rules were removed and replaced by the associated company rules.

Broadly speaking, companies under the control of the same person or persons are ‘associated’, there are a few subtleties that differentiate these rules from the related 51% company rules, with one of the most significant points being that individuals can be the ‘bridge’ to make two companies ‘associated’.

The relevance of this point now is mainly in respect of quarterly instalment payments, as companies exceeding the threshold of £1.5m (which is divided by the number of associated companies) are required to pay tax in quarterly instalments, which are due earlier than the normal nine month deadline.

More details on the impact and implementation of these rules can be found within a previous article here: What are associated companies and why do they matter?

• The VAT registration threshold is the turnover level at which you need to register for VAT. This has been at £85,000 since April 2017. Today’s budget increased this limit to £90,000 from 1 April 2024. The de-registration limit has also increased from £83,000 to £88,000.

• In a nod to the Sun newspaper’s ‘Keep it Down; campaign, the Chancellor confirmed that fuel duty will remain frozen for another 12 months. He said this would save the average driver £50 per year.

• A new ‘vaping products duty’ was also announced “to discourage non-smokers from taking up vaping”. This is scheduled to take effect from 1 October 2026. A consultation has been published on the detailed design and implementation of the duty, which will close on 29 May 2024. Alongside this new duty, the government will also introduce a one- off tobacco duty increase for cigarettes and tobacco, in order “to maintain the financial incentive to choose vaping over smoking.”

• Air passenger duty will also rise from April 2025 for non-economy passengers.