Tax changes from 2024 Spring Budget

If you didn’t manage to sit through over an hour of heckling, bad jokes, and disputable data, then we don’t blame you. Fortunately, however, we did, and we took notes. We summarise the key highlights from the Chancellor’s 2024 Spring Budget announcement for you, as well as provide our own independent commentary of what we think it really means for us.

Starting with duties and levies

• The freeze on alcohol duties has been extended for a further 6 months until February 2025. The Chancellor claims that this is intended to support all the struggling pubs in the UK, as well as provide relief to the wider hospitality sector. However, our thoughts are that people in general are struggling with the cost-of-living crisis and simply unable to afford going out as much as they once were. The relief may help some businesses survive, but it doesn’t seem to go far enough to see them thrive.
• Fuel duty has also been frozen for yet another year, which makes it the 14^th year in the row that a Chancellor has done this – hardly a groundbreaking measure. It is estimated to save drivers £50 next year, which isn’t much to write home about. Not only that, but the saving heavily relies on retailers passing this on to the consumer.
• A new vaping levy is to be introduced in October 2026 following concerns that its affordable pricing is attracting non-smokers to take up electronic smoking. To ensure it is still an attractive alternative to cigarettes, there will also be an increase in tobacco duty, but the exact amount was not announced.
• The airline industry is particularly disappointed with today’s 2024 Spring Budget as the Chancellor breaks a pledge made by the Prime Minister back in September to not add taxes to flying. Instead, there will now be a one-off adjustment to Air Passenger Duty on all non-economy flights. In reality, this is likely only to affect the wealthiest, as even the aviation sector admits it will penalise families travelling in Premium and leisure travellers.

Moving on to property taxes

We noticed a slight emphasis on property taxes and spending during the 2024 Spring Budget including:

• £242 million worth of investment in almost 8,000 new houses in Central London. £124 million has been allocated to building up to 7,200 homes in Barking, whilst £118 million has been earmarked for Canary Wharf. Needless to say that public opinion is largely disgruntled as to why there hasn’t been more of a focus on affordable housing across less affluent areas of the country.
• Furnished Holiday Lets (FHL) are to be abolished come 6 April 2025. The favourable tax treatment for landlords of second homes used as FHLs is to end. This is as a response to the criticisms that there is a lack of housing for people to buy or rent in the towns that they live and work in.
• Multiple Dwelling Relief to be abolished coming into effect 1 June 2024. Hunt stated that the relief was not achieving its intended goal of stimulating the private rental sector and was instead being abused by those buying multiple properties for personal use. This change will certainly impact those who have been considering transferring property ownership into a limited company entity but have not yet done so.
• Higher rate capital gains tax (CGT) on residential property to be reduced to 24% from 28%. One of the very few tax cuts that was announced by the Chancellor only benefits those who are wealthier and fall into the higher tax brackets. It raised eyebrows when the Chancellor made no mention of reducing CGT for those within the basic rate tax bracket and therefore opened up the Conservative party to criticism that they continue only to protect the rich.

Only one point to note for small businesses

It was clear that the 2024 Spring Budget was focused on winning favour with families and workers ahead of the impending general election, leaving small businesses underwhelmed. Nevertheless, it cannot be ignored that there was one welcome announcement, whereby the Chancellor increased the VAT threshold from £85,000 to £90,000. The threshold has remained at £85,000 since 2021, so, although a modest increase, will still bring relief to small businesses in more ways than one. Reducing the administrative burden for more small businesses will make an incredible difference in both saving them time and money.

Finally, onto income taxes

Despite any expectation that the Chancellor would pull a rabbit out of the hat, especially as this will be the last Budget before the general election, there were no surprises. Most news outlets had already reported on plans to reduce National Insurance (NI) as opposed to the optimistic hopes of increasing the personal allowance or raising the income tax bands. However, further details are as follows:

• Changing child benefits to consider household income as opposed to parental income. Currently, two parents both earning £49,500 can claim full child benefits, whereas a family where one parent is earning £55,000 and the other is earning £10,000 will have to pay the high income child benefit charge and receive less child benefits. To improve fairness in the system, the Chancellor says child benefits will consider the entire household income but this is not due to come into force until April 2026, allowing HMRC time to implement and facilitate this. More immediately for parents however, the threshold in which all child benefits is removed will be raised from £60,000 to £80,000 from April 2024.
• A new British ISA is to be introduced. The new ISA is intended to fund UK-only business investments and will allow for individuals to save up to £5,000 tax-free. Any gains made will be CGT-free and this will be offered in addition to the existing ISA allowance of £20,000 a year.
• The non-domicile tax status is to be axed and replaced with a residency system. As a ‘non-dom’, individuals who live in the UK but are not permanently based here can choose to only pay tax on earnings made in the country, or any funds they bring into the country. That means they’re able to elect to pay lower rates of tax in the other country that they are domiciled in, despite spending significant or regular time in the UK. It is a contentious area of taxation because many argue it benefits wealthy foreigners. From April 2025 however, this will no longer be the case. Instead, non-UK individuals are able to pay no UK tax on foreign income only on their first 4 years in the UK, after which all worldwide income will be taxable in the UK if they remain a resident here.
• National Insurance sees further cuts by 2p. NI had already been reduced by 2p in January 2024 and will see a further 2p deduction in April 2024. This only affects employee NI and self-employed NI, but employer’s NI remains at 13.8%. Although this is a tax-cut, we should not ignore that income tax thresholds and allowances are still frozen. With the increase to the national minimum wage, and wages overall rising above inflation levels, this will actually result in more people paying higher taxes.

For more updates on changes announced in the 2024 Spring Budget, please download our free PDF summary.