Spring Budget 2024

Further reduction in Employee National Insurance Contributions (“NICs”)

Following the previous reduction in the 2023 Autumn Statement, and as very widely publicised in advance, the Chancellor announced a further reduction in the main rate of Class 1 primary NICs (the contributions paid by employees) from 10% to 8%, effective 6 April 2024. There is no change to the rate paid on earnings above the “Upper Threshold” by higher earners (which remains at 2%), nor to Class 1 secondary NICs (the contributions paid by employers).

Effective marginal tax rates for employees, including employee NICs, will broadly be 28% (basic rate), 42% (higher rate), and 47% (additional rate).

The Chancellor announced an intention to further reduce employee NICs when possible.

Taxation of Non-Domiciled Individuals

The Chancellor announced that the current rules for individuals whose long-term home (their “domicile”) is outside the UK (so-called non-domiciled individuals or “non-doms”) will be abolished. This will be replaced with a new regime based on tax residence status with effect from 6 April 2025.

Under the new regime, if an individual has been tax non-resident for at least ten consecutive tax years, then when that individual becomes UK tax resident they will not pay UK tax on overseas income and gains for the first four tax years in which they are resident. Thereafter they will pay tax on their worldwide income and gains (in the same manner as those previously referred to as UK domiciled).

During the period during which individuals are exempt from UK tax on their overseas income and gains they will be able to bring this into the UK without incurring additional tax. This is a sharp change from the current rules which would tax these remittances to the UK.

Overseas workday relief which, broadly, allows current non-doms to exclude income from non-UK workdays from tax in the UK for their first three years of being UK tax resident (subject to certain structuring requirements) will be retained and simplified under the new regime (including removing the requirement to keep those earnings outside of the UK).

For current non-doms there will be transitional arrangements, which will include the ability for a two-year period to bring to the UK their overseas income and gains.

No decision has yet been made on the implications for inheritance tax, and a consultation is expected.

Capital Gains Tax (“CGT”) Rates for Residential Property (but Not Carried Interest) Reduced

The higher rate of CGT payable on disposals of residential property (currently 28%) will be reduced to 24% whilst the lower rate (currently 18%) remains unchanged.

It was confirmed that the higher carried interest rate will remain at 28%.

High Income Child Benefit Charge (“HIBC”) Threshold

The threshold will be increased from £50,000 to £60,000 and the top-end of the tapering will increase to £80,000. The government plans to administer this on a household basis by April 2026 and will consult on this in due course.

Other Measures

Some additional items of interest to employers may include:

• As expected, there was no change to the personal allowance reduction, meaning that the marginal income tax rate applicable to earnings between £100,000 and £125,400 remains 60% (before dropping to 45% for earnings in excess of £125,400).
• The government will provide an update on tackling non-compliance with tax laws in the umbrella market (arrangements through which non-employee contractors are often engaged) shortly.
• The current Transfer of Assets Abroad (“ToAA”) rules are to be strengthened from 6 April 2024 to prevent individuals from using a company to bypass the current ToAA rules.
• The furnished holiday letting rules will be abolished from 5 April 2025. This is intended to eliminate the tax advantages of letting property on a short term letting compared to longer term letting.

Capital Allowances

At the 2023 Autumn Statement, the government announced that temporary first year allowances available for qualifying expenditure on plant and machinery (known as ‘full expensing’) would be made permanent. Under the full expensing regime, companies may claim a deduction from their taxable profits in the year qualifying expenditure is incurred at a rate of 100% for main pool additions and 50% for special rate pool additions. However, full expensing currently only applies to companies investing in machinery for their own use.

The government announced during the Spring Budget that a technical consultation on extending full expensing to assets used for leasing “when fiscal conditions allow” including draft legislation will be released shortly.

Corporation Tax Rate and New Reliefs

The corporation tax rate shall remain at 25%. The Chancellor announced welcome changes to corporation tax related reliefs for the film and cultural sectors.

In relation to British independent film producers, the Government is introducing a new UK Independent Film Tax Credit at a rate of 53% for films with budgets under £15 million that meet the conditions of a new British Film Institute test. There will also be a 5% increase in tax relief for UK visual effects costs in film and high-end TV, under the Audio-Visual Expenditure Credit (“AVEC”).

From 1 April 2025, the rates of Theatre Tax Relief, Orchestra Tax Relief and Museums and Galleries Exhibition Tax Relief will be permanently set at 40% (for non-touring productions) and 45% (for touring productions and all orchestra productions). The sunset clause for museums and galleries relief will be removed making it a permanent tax relief.

VAT

The VAT registration threshold will be increased from £85,000 to £90,000 from 1 April 2024. To correspond with this, the deregistration threshold will also increase from £83,000 to £88,000.

Stamp Duty Land Tax (“SDLT”)

The government has announced that Multiple Dwellings Relief (“MDR”), which provides relief from SDLT for transactions involving the acquisition of multiple ‘dwellings’ (e.g. a block of flats) by enabling the tax payable to be determined by reference to the average consideration payable (rather than on a unit-by-unit basis), will be abolished from 1 January 2024. Property transactions with contracts that were exchanged prior to 6 March 2024 will continue to benefit from the relief irrespective of the date on which the contracts will complete.

SDLT applies to transactions involving land in England and Northern Ireland and therefore it is not clear at this stage whether the equivalent reliefs from Land and Buildings Transaction Tax (“LBTT”) in Scotland and Land Transaction Tax (“LTT”) in Wales, responsibility for which is devolved to the Scottish and Welsh administrations, respectively, will be abolished.

Reserved Investor Fund (“RIF”)

As part of its ongoing review of the UK’s funds regime, the government has announced that it will legislate for the introduction of the RIF in the Spring Finance Bill 2024 (with the date of implementation yet to be confirmed).

The RIF is a new unauthorised contractual scheme that is intended to complement the existing mix of fund regimes available and make the UK a more attractive location for establishing funds by offering a regime that provides more flexibility than the existing UK Co-ownership Authorised Contractual Scheme (“CoACS”) and an alternative to setting up offshore via vehicles such as Jersey Property Unit Trusts (“JPUTs”), whilst offering a similar tax regime. The RIF is expected to be particularly suitable for investment in UK commercial real estate, although it will also be relevant to other asset classes across private and public markets.

Energy (Oil and Gas) Profits Levy (“EPL”)

The government has announced that it will extend the Energy Profits Levy (EPL), a temporary 35% tax on the exceptional profits earned by companies from the production of oil and gas, by one year from 31 March 2028 to 31 March 2029.

It also announced that it will introduce legislation in Spring Finance Bill 2024 to provide for the Energy Security Investment Mechanism (“ESIM”). The detail and application of the ESIM were announced in a Technical Note at Autumn Statement 2023.