Income Tax Rates and Bands:
No changes were made to the Income Tax rate bands, which have remained frozen since 2020/21. The rates of tax for the UK, excluding Scotland, remain at 20%, 40% and 45%. The threshold for the 45% tax band remains £125,140. The personal allowance, the amount an individual can typically earn before paying income tax, will continue at £12,570 and the higher rate tax threshold will remain at £50,270.
Scottish income tax rates were confirmed in the Scottish Budget on 19 December 2023. In 2024/25 there is an additional income tax band that starts from £75,000, where the income tax rate will be 45%. This gives six bands in total. Higher rate taxpayers (income of £43,663+) will continue to pay 42% income tax. “Top rate” taxpayers (income of £125,140+) will pay 48%. Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK.
You can find details of the Scottish Budget here
There are no changes to the savings and dividend rates of tax for income above the savings and dividend allowances.
National Insurance Contributions:
The Chancellor repeated his cut to NICs first seen in the Autumn Statement last November. Both the rate of Class 1 primary (employees) National Insurance contributions (NICs) and Class 4 NICs will reduce by 2 % (i.e. from 10% to 8% and from 8% to 6% respectively) from 6 April 2024. For employees, this means that they may save up to £754 in the 2024/25 tax year.
High Income Child Benefit Charge:
From 6 April 2024, the High Income Child Benefit Charge (HICBC) threshold will be increased from £50,000 to £60,000. It will then be tapered and won’t be fully withdrawn until a person’s income is £80,000 or above. Also, from 6 April 2026, the HICBC will be assessed on household income instead of on an individual’s income. We await details of how this will operate.
Annual Dividend Allowance:
No further changes were made to the allowance, which is £1,000 in the current tax year (to 5 April 2024). The allowance will reduce to £500 for the 2024/25 tax year.
Pensions:
There were no further changes to Pensions tax relief at the Spring Budget. The Annual Allowance remains at £60,000 with the annual taper at £260,000 for 2024/25.
UK Individual Savings Account (ISA):
A ‘UK ISA’ will be introduced giving individuals an extra £5,000 allowance, on top of the existing ISA allowance. This is aimed at encouraging investment in UK companies. A consultation will follow on the implementation of the new ISA.
The normal ISA allowances remain the same for 2024/25 being £20,000 for an individual taxpayer, £9,000 for a Junior Isa, £4,000 for a Lifetime ISA and £9,000 for the Child Trust Fund.
Capital Gains Tax (CGT):
The CGT annual exemption is currently £6,000 (for the year to 5 April 2024). This will reduce to £3,000 for the 2024/25 tax year. The allowance for trusts will be a maximum of £1,500 for 2024/25.
The main rates of Capital Gains Tax remain at 10% for a basic rate taxpayer and 20% for a higher/additional rate taxpayer. Currently residential property gains are taxed at 18% if they fall into an individual’s basic rate band of income tax and 28% if they fall into the higher /additional rates of income tax. The higher rate of Capital Gains Tax on residential property gains will be cut from 28% to 24% from 6 April 2024.
Furnished Holiday Lets:
The furnished holiday lettings (FHL) tax regime, which provides tax advantages for short-term furnished holiday properties, will be abolished from April 2025.
The new measures will have far-reaching consequences for owners who have let their properties for holiday rental income and met the criteria set out in the FHL regime. It includes those who might own a single holiday home made available for letting or those who let their properties through Airbnb or similar agencies. There will be the loss of the advantageous use of capital allowances and generous capital gains tax reliefs and rates available.
Inheritance Tax (IHT):
Although there had been a lot of talk in the press, regarding possible changes to Inheritance Tax in this budget. The Chancellor made no changes other than, from 6 April 2025, the scope of IHT agricultural relief will be extended to land managed under an environmental agreement with, or on behalf of, the Government, devolved administrations, public bodies, local authorities, or approved responsible bodies.
Stamp Duty Land Tax (SDLT):
Stamp Duty Land Tax Multiple Dwellings Relief (MDR) will be abolished for transactions from 1 June 2024 for property transactions in England and Northern Ireland. MDR applies where more than one residential property is acquired as part of the same transaction (or part of the same linked transaction). MDR was introduced to incentivise larger investments in residential developments, but after review, the Government has decided that this purpose has not been achieved and the relief is often abused, hence it is being scrapped. It will be interesting to see if the devolved Governments in Scotland and Wales follow suit with their own changes.
Childcare:
Starting from April 2024, existing childcare support will be expanded in phases. By September 2025, most working families with children under the age of 5 will be entitled to 30 hours of childcare support.
The changes are being introduced gradually to make sure that providers can meet the needs of more families. This means that:
From April 2024, eligible working parents of 2-year-olds will be able to access 15 hours childcare support.
From September 2024, 15 hours childcare support will be extended to eligible working parents of children from the age of 9 months to 3-years-old.
From September 2025, eligible working parents with a child from 9 months old up to school age will be entitled to 30 hours of childcare a week.
Like the existing offer, depending on your provider, these hours can be used over 38 weeks of the year or up to 52 weeks if you use fewer than your total hours per week.
Taxation of non-UK domiciliaries:
The non-UK domiciled (‘non-dom’) tax regime will be abolished and replaced from 6 April 2025. A new regime will then be introduced, under which new arrivals will not pay UK tax on foreign income and gains for the first four years of residence (only), before paying tax on worldwide income and gains in the normal way.
Anti-avoidance:
From 6 April 2024, new rules will be introduced to prevent individuals bypassing the Transfer of Assets Abroad (TOAA) provisions by using a company to transfer assets offshore.
BUSINESS –
Corporation Tax Rate:
No significant changes were announced to Corporation Tax. The main rate of Corporation Tax remains 25% on taxable profits over £250,000. The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less. Companies with taxable profits between £50,000 and £250,000 will be subject to Corporation Tax at a rate between 19% and 25%.
VAT:
The VAT registration threshold is to be increased from £85,000 to £90,000 and the deregistration threshold increased from £83,000 to £88,000 from 1 April 2024.
Excise Duty:
An Excise Duty on vapes will be introduced from 1 October 2026, alongside an increase in tobacco duties from the same date.
Fuel Duty:
Fuel Duty is to be frozen. The planned 5p per litre cut to fuel duty on petrol and diesel, due to end in April 2023 will remain until March 2025.
Alcohol Duty:
Alcohol Duty will continue to be frozen until 1 February 2025.
Capital Allowances:
‘Full expensing’ and the 50% first-year allowance for capital expenditure for companies investing in plant and machinery will be extended to leased assets when affordable to do so.
As always, the information outlined above is for general guidance purposes only. We appreciate that every individual and business have different circumstances and you should always seek appropriate professional advice before you act on any of the information provided.
If you would like more information on anything announced in the budget or require wider business or planning guidance, please do contact us for further advice.
