Spring Budget 2024 – key tax announcements

Against the backdrop of an election (probably) later this year, the Chancellor was evidently feeling the pressure to make tax announcements that would find favour with the electorate, whilst constrained by the economic environment. Warning that further tax cuts can only be funded by growing the economy and making the state more efficient, the emphasis was on fiscal responsibility and increasing resilience to future shocks. The reduction in employee NICs – matching that in the Autumn Statement - had been so heavily rumoured in the immediate run up to budget day that it was hardly a surprise.  However it had not been clear until the budget announcements precisely which offsetting (tax raising) measures would be forthcoming.   

A summary of what was included in today’s budget announcements, both headline-grabbing announcements and technical developments, follows.

Business tax measures

Full expensing – consultation on extension to leasing

It was announced in the Autumn Statement that full expensing is to be made permanent. However expenditure on plant and machinery for leasing is excluded at present. It was announced today that the government will publish draft legislation for technical consultation, with a view to extending full expensing to assets for leasing when fiscal conditions allow.

Amendments to Common Reporting Standard

It was announced today that the government is launching a consultation to seek views on the implementation of the OECD’s amendments to the Common Reporting Standard, the international tax transparency regime for the automatic exchange of information on financial accounts. The consultation also seeks views on a potential extension of the regime to include reporting on UK resident taxpayers by UK financial institutions.

The Crypto-Asset Reporting Framework

It was announced today that the government is launching a consultation on the implementation of the OECD’s Crypto-Asset Reporting Framework, the new international tax transparency regime for the automatic exchange of information on crypto-assets. The consultation also seeks views on a potential extension of the regime, to include reporting on UK resident taxpayers by UK service providers.

The Economic Crime (Anti-Money Laundering) Levy

It was announced today that the government will increase the charge paid by very large businesses with UK revenue greater than £1 billion and which are regulated for anti-money laundering purposes under the Economic Crime (Anti-Money Laundering) Levy. The charge for these entities will rise from £250,000 to £500,000 per annum, from tax year 2024 to 2025 onwards.

Freeports sunset dates

The government announced at the Autumn Statement 2023 that it would extend the window to claim the tax reliefs available in Freeport special tax sites from 5 to 10 years.

Today, it was announced that the sunset date will be extended via secondary legislation to:

• 30 September 2031 for special tax sites in respect of English Freeports; and
• 30 September 2034 for special tax sites in respect of Scottish Green Freeports and Welsh Freeports.

The Reserved Investor Fund

Proposals for an unauthorised contractual scheme, intended as an onshore, flexible, lower-cost alternative to existing fund structures, were published in April 2023.  It was today announced that the government will begin legislating for the Reserved Investor Fund in the Spring 2024 Finance Bill.  The detailed tax rules will be provided for in secondary legislation, following a period of stakeholder engagement. A summary of responses to the 2023 consultation on the scope and design of the regime for the Reserved Investor Fund was published today.

Energy Profits Levy – Energy Security Investment Mechanism

The Energy Profits Levy is a temporary 35% levy on profits arising from the upstream production of oil and gas, in addition to the permanent tax regime of ring fence corporation tax which is charged at 30% and the supplementary charge which is at 10%.

The Energy Security Investment Mechanism will ensure that the Energy Profits Levy ceases if the 6-month average price for both oil and gas is at or below the stipulated threshold prices (71.40 dollars per barrel for oil and 54 pence per therm for gas) prior to the Energy Profit Levy sunset date, as to which see below.  The thresholds will be adjusted from 1 April 2024, and annually thereafter, by the preceding December’s Consumer Prices Index figure.

This measure will take effect following Royal Assent to the Spring Finance Bill 2024.

Energy Profits Levy – one year extension

It was announced today that the government will extend the end date of the Energy Profits Levy to 31 March 2029, a one year extension.

Private Intermittent Securities and Capital Exchange System (PISCES)

A consultation launched today, following on from an announcement made as part of the Edinburgh Reforms and subsequently referred to in the Chancellor’s Mansion House speech, relating to a proposal to provide private companies with an intermittent trading venue. PISCES would provide a regulatory framework for the intermittent trading of private company shares, incorporating elements from capital markets, such as multilateral trading, and elements from private markets, such as a greater discretion on what company disclosures should be made public.  The consultation seeks respondents’ views on a range of issues relating to the features of the proposed regime.

Permanent 40% and 45% rates for theatre, orchestra, museum and galleries tax reliefs

In order to boost investment in cultural sectors, from 1 April 2024, there will be new permanent rates of Theatre Tax Relief, Orchestra Tax Relief and Museums and Galleries Exhibition Tax Relief. The rates will be set permanently at 40% for non-touring productions and 45% for touring productions. Additionally, Museums and Galleries Tax Relief will be made permanent, with the government removing the sunset clause.

New UK Independent Film Tax Credit

The Chancellor has announced a new UK Independent Film Tax Credit (IFTC), an enhanced tax credit for eligible UK-made films, with production budgets of up to £15 million. Under the IFTC, such eligible films will be able to opt-in to enhanced Audio-Visual Expenditure Credit, at a rate of 53%, on their qualifying expenditure, subject to a cap.

Claims can be submitted to HMRC from 1 April 2025 onwards, in respect of expenditure incurred from 1 April 2024, provided a film began principal photography after 1 April 2024.

Key indirect tax measures

VAT thresholds

The VAT registration threshold has remained at £85,000 since 2017.  It was announced today that the taxable turnover threshold is to be raised to £90,000, effective from 1 April 2024.

Abolition of multiple dwellings relief (MDR)

The Chancellor announced during his Budget speech that MDR, a relief from SDLT applicable to bulk purchases of residential property, will be abolished for transactions with an effective date on or after 1 June 2024. This follows an external evaluation of MDR, commissioned by the government, which found that there was “no strong evidence” that MDR was “meeting its original objective of supporting investment in residential property and the private rented sector”.

There will be transitional rules which will allow MDR to be claimed for contracts which are exchanged on or before 6 March 2024, regardless of the date of completion, but this will be subject to some exclusions (such as where there is a variation of the contract after that date).

Today’s announcement includes a summary of the responses to the consultation, launched in November 2021, on the subjects of SDLT on mixed property purchases and MDR. It has today been confirmed that the government will not take forward any changes to the SDLT rules as they apply to mixed property purchases.

SDLT amendments for acquisitions by registered social landlords and public bodies

Amendments are being made to the SDLT exemption for purchases of social housing by registered providers where the purchase has been funded or partly funded by public subsidy. The amendments are being made to ensure that the exemption works as intended, as out-of-date references and definitions in the exemption were causing some purchases to be subject to SDLT, contrary to the policy intention.

The amendments update the list of public subsidies to include public grants which have been permitted to be retained and recycled to qualify for the exemption, and will also remove public bodies from the SDLT 15% higher rate charge.

Tax measures for individuals

National insurance contributions (NICs) rates

With the current government focusing on reducing the tax burden on working individuals, there has been keen expectation of a further reduction in NICs rates.

The reduction from 12% to 10% in the Class 1 rate of employee NICs between the Annual Threshold and the Upper Earnings Limit announced at the Autumn Statement came into effect on 6 January 2024. Additionally the Chancellor announced in the Autumn Statement that Class 2 NICs, currently paid by self-employed individuals, will be abolished and that the Class 4 rate for self-employed individuals will reduce from 9% to 8%, in both cases with effect from 6 April 2024.

A further 2p cut (from 10% to 8%) to the Class 1 rate of employee NICs between the Annual Threshold and the Upper Earnings Limit was announced today, with effect from 6 April 2024 and worth £450 per year to the average worker.

A further reduction (from 8% to 6%) in the main rate of Class 4 NICs for self-employed individuals with effect from 6 April 2024 was announced today. 

New UK ISA

In a move intended to promote investment, the Chancellor announced the introduction of a new UK ISA, providing a dedicated £5,000 allowance for investment in UK assets. A consultation on the detail of this proposal has been launched.

Changes to capital gains tax rate on UK residential property disposals

The higher rate of capital gains tax for residential property disposals will be reduced from 28% to 24%, with effect from 6 April 2024. The lower rate will remain at 18%. 

Reform of tax regime for non-domiciled individuals

Reforming the regime for non-domiciled individuals has been on the Labour agenda for some time now, although it was George Osborne who initially presided over the most significant modern changes to the regime, including ending permanent non-domiciled status for income and capital gains tax purposes from April 2017. 

Recent speculation over significant amendments to the regime has been proved correct, with Jeremy Hunt today announcing the abolition of the “non-dom regime”.

In more detail, this will involve the ending of the remittance basis of taxation for resident non-domiciled individuals. It will be replaced with a simpler residence-based regime, to take effect from 6 April 2025.

In order to retain an attractive regime for those looking to move to the UK, new arrivals (meaning those with a period of 10 years of consecutive non-residence) will be able to benefit from 100% tax relief on foreign income and gains for their first four years of UK tax residence. During this time, overseas income and gains may be brought to the UK without an additional tax charge – which represents an improvement upon the tax consequences which currently arise where foreign income and gains are remitted to the UK.

Once an individual has been tax resident in the UK for more than four years, they will pay UK tax on any newly arising foreign income and gains (i.e., be subject to UK tax on the same basis as all other UK residents). According to the documents released today, once the four-year period is complete, protections will also be removed in relation to non-resident trusts, with foreign income and gains arising to such trusts after 6 April 2025 being subject to the new regime. There will be some protections for foreign income and gains arising in such non-resident trusts before that date.

There will also be amendments to the scope of the current inheritance tax regime, which relies on the concept of domicile. The government has announced that it will consult on the best way to move inheritance tax to a residence-based regime.

The government has said that, for those who can no longer rely on the remittance basis of taxation as of 6 April 2025 – but had been relying on it prior to that date – there will be transitional rules intended to soften the impact of the new regime. This will include a reduction in the foreign personal income of the eligible individuals which is subject to tax in 2025-2026, and a “Temporary Repatriation Facility” which will encourage impacted individuals to bring foreign income and gains arising prior to 6 April 2025 to the UK at a reduced rate.

It has also been announced that Overseas Workday Relief (OWR) for the first 3 tax years of UK residence will be retained and simplified. From 6 April 2025 eligibility for OWR will be based on an employee’s residence and whether they opt to use the new four year regime. 

No draft legislation has yet been released, and the government has announced that decisions on the detailed operation of the system are yet to be taken. A consultation will be released in due course.

Transfer of assets abroad

The recent Supreme Court judgment in the case of Fisher was seen as a significant taxpayer victory in its narrowing of the scope of the transfer of assets abroad anti-avoidance rules. It was clear from comments in the decision that HMRC were concerned that the judgment effectively opened a  loophole for UK residents who transfer assets abroad via the medium of a UK company.

Today’s publications include an announcement that such loophole will be closed, by ensuring that a participator in a UK or non-UK close company is deemed to be a transferor of the assets of that company for the purposes of the rules. The usual escape clauses (for transactions where there is no tax avoidance purpose, or where the transactions are genuine commercial transactions) will also apply to such company transfers. The new measure will have effect for income arising to persons abroad on and after 6 April 2024.

Abolition of furnished holiday lettings (FHL) regime

The government has announced that, with effect from April 2025, it will abolish the FHL tax regime, in order to level the playing field between landlords who let out short-term furnished holiday properties and those who provide longer-term rentals for tenants.

Anti-forestalling measures will apply from today, 6 March 2024, to prevent the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains tax relief under the current regime.