Spring Budget 2024: Individuals

Rebecca Durrant, Partner, National Head of Private Clients

In a particularly interesting Budget for individuals, the 2% decrease to National Insurance will save the average worker £900 per year. The ‘tax cut’ will be paid for by replacing the preferential tax regime for non-UK domiciled individuals with a residency-based regime - will this be enough to ensure they remain in the UK?

On property taxes, there will be disappointment for those with holiday let businesses, but from an economic perspective it is unlikely that the new rules will have any significant impact. Although the reduction of Capital Gains Tax on the sale of residential property from 28% to 24% will be good news for second home-owners and buy to let investors.

If you require further information or support, get in touch or speak to your usual Crowe contact.

Our tax specialists identify the key tax changes and outline practical support for you.

Non-dom status to be abolished and replaced
Residential Property Taxes – all change again!

Little real change to support business owners
Welcome changes for families

Non-dom status to be abolished and replaced

Author: Jennifer McNally, Partner, Private Clients

After much speculation, the Chancellor has finally announced radical changes to the non-dom regime. With effect from 6 April 2025, the regime is to be abolished and replaced by a simple, fairer system based on residence rather than domicile.

The changes impact:

individuals moving to the UK from 6 April 2025 who have had a period of 10 years consecutive non-UK residence (new arrivers)
individuals who are currently UK residents and availing of the non-dom regime
individuals who have set up offshore Trust structures which are protected settlements.

Foreign income and gains generated by new arrivers will be exempt from UK tax during their first four years of UK tax residence and can be remitted tax free. Existing UK tax residents can benefit from the scheme until the end of their fourth year of UK tax residence.

Transitional rules will apply to existing non-doms which include:

50% reduction in personal foreign income subject to tax in 2025/26 for those who lose access to the remittance basis on 6 April 2025 and are not eligible for the new regime
rebasing of capital assets to their 5 April 2019 valuation for disposals after 6 April 2025
12% rate of tax to apply to remittances in 2025/26 and 2026/27
removal of protections for non-resident Trusts from 6 April 2025.

While simplification of the regime is welcome, many questions remain around the transitional arrangements and how these will operate, not least the issue of Inheritance Tax which is to be consulted on in due course.

Residential Property Taxes – all change again!

Author: Mark Stemp, Private Clients

The taxation of residential property has once again seen a number of tax changes, including:

the reduction of the higher rate of capital gains tax on residential property to 24%
the abolition of the Furnished Holiday Let regime
the abolition of SDLT Multiple Dwellings Relief.

Reduction in the Capital Gains Tax rate

In better news for taxpayers, a reduction in the higher rate of Capital Gains Tax (CGT) to from 28% to 24% was announced, effective from 6 April 2024.

As well as impacting landlords, this change will also be of note to second homeowners, and the amount of CGT payable on sale.

Furnished Holiday Let

Furnished Holiday Let (FHL) have benefited from several tax advantages over the years but this recent announcement is likely to have two major impacts.

The additional tax cost on the removal of full relief on loan interest and instead claiming the 20% tax credit.
The removal of Business Asset Disposal Relief for these disposals meaning FHL’s will no longer be able to benefit from the lower 10% CGT rate.

With the rules coming in from April 2025 there is little time for landlords to assess the impact these changes might have, with the restriction of loan interest relief likely to have significant cashflow impacts for landlords.

Stamp Duty Land Tax - Multiple Dwellings Relief Abolition

It has long been mooted that this relief was subject to change, with a widespread belief that it has been abused in certain quarters.

While the abolition, effective from 1 June 2024, will look to end this abuse, it does beg the question of what potential knock on consequences could be for transactions genuinely involving multiple dwellings, and could see a number of transactions suffer an increased Stamp Duty Land Tax footprint, even though they may not have been the target of today’s announcement.

Little real change to support business owners

Author: Simon Warne, Partner, Private Clients

The background of low growth, stubborn inflation and high borrowing were always going to constrain any political impulse to make this a pre-election Budget to remember. The outlook for the next Chancellor also seems to be about as bleak as any since the 1950s with stagnation of living standards and an overall tax level of 36.3%, almost a post-war high.

Some public service cuts are already in spending forecasts and achieving any meaningful spending reductions are going to be difficult unless areas previously considered untouchable are looked at again.

Jeremy Hunt is sitting on effective tax rises brought about by the fiscal drag of allowances frozen until 2028 and had already given some of that back by making reductions in employee National Insurance rates (cut from 12% to 10% in January on earnings between £12,571 to £50,270).

In the circumstance of baked-in Income Tax increases, a Corporation Tax rate of 25% (a legacy of Rishi Sunak as Chancellor), Jeremy Hunt probably did not have many good choices as a tax giveaway, so it had to be a cut of Employees National Insurance from 10% to 8%. While welcome, this doesn’t help employers - he could have considered a cut to the employer rate, known as the jobs tax, currently at an all-time high of 13.8% to support owner-managed businesses. The problem here though is that any benefits to employees are indirect, which secures little in the way of urgently needed political capital.

Family businesses will be pleased that their employees will benefit from the tax cuts though these reductions need to be set in the context of a stubbornly high tax environment and previously announced National Living Wage increases otherwise.

Welcome changes for families

Author: Nick Latimer, Partner, Private Clients

On top of the National Insurance reduction, the Chancellor offered a very welcome increase to the threshold at which child benefit is withdrawn (known as the High Income Child Benefit Charge) to £60,000 from April 2024.

The Chancellor will also introduce a new 'UK ISA' allowing an additional £5,000 of saving per year into UK equities, on top of the £20,000 allowance, although the details of this and when it will be available is not yet clear.

On the downside, the starting rate for savings, which gives those with savings income a 0% band on up to £5,000, will be frozen along with other thresholds, delivering the exchequer an additional £25 million of tax revenues in 2025/26.

The child benefit change will represent a £1,260 boost on average for around half a million working families. From the 2024/25 tax year, the taper will start at £60,000, an increase from the current £50,000 threshold, and the rate at which child benefit is withdrawn will halve to 1% for every £200 of additional income, meaning a household with someone earning up to £80,000 (instead of £60,000) will be able to benefit. The impact of the tax charge can be mitigated with charitable donations and pension contributions.

The intention is for the High Income Child Benefit Charge to be based on 'household income' by April 2026, which would be a fairer way of operating the charge. Even with the April 2024 change, a household with two earners at £60,000 can benefit from child benefit, whereas a household with one person earning £80,000 would not. The detail of how this would be implemented has yet to be determined.

The UK tax system is littered with thresholds and variable marginal rates, with the withdrawal of child benefit being only one. Others include the removal of the personal allowance and childcare support for those with income over £100,000. Any measures that the government can take to simplify the tax regime and remove anomalies would help hard working families.