We acknowledge that is usually the case in most Budgets (although most people would probably feel they are more regular losers than winners) but this year the distinction seems to be more widespread.
Those in work or self-employed and paying national insurance are definitely winners in terms of the 2% reduction in national insurance contributions from 6 April 2024. Pensioners, the ‘self-employed’ being paid dividends rather than salary through their companies, those running rental businesses and people earning less than the NIC threshold will not, however, benefit from the NIC reduction.
Future sales of residential properties will see a cut in the maximum capital gains tax rate from 28% to 24% so landlords are supposedly winners. However, this reduction barely begins to off-set the significant tax costs landlords of residential property have suffered through tax changes in recent years, let alone the increases in mortgage costs and rent freezes. For our clients at least, these have been far more of a deterrent to remaining in the property rental sector than the prospect of a lower capital gains tax rate. Whilst they may now have in theory a ‘win’, we don’t think many landlords will be smiling.
A headline grabbing announcement is undoubtedly the abolition of ‘Non-Dom’ status and for those individuals staying in the UK for an extended period they will certainly be losers.
The increased threshold for the High Income Child Benefit Charge to £60,000 along with the halving of the tax charge will be welcome news for many families. Again, it doesn’t come without losers though, as longer-term a change will see the benefit applied per household income rather than individually.
Other winners are motorists with the cut in fuel duty remaining in place for another year and an alcohol duty freeze until next February. Losers include business class travellers, those who use vaping products and smokers with a new duty on vaping and an increase in tobacco duty albeit not until October 2026.
So, let’s look at the announcements in the Budget in more detail:
There were no new announcements regarding rates of tax, personal allowances or rate band thresholds in terms of UK income taxes for those out with Scotland.
For those of us who are Scottish taxpayers, although no increases (or reductions) were announced yesterday, we do have a new 45% tax rate for those earning between £75,001 and £125,140 and a top rate being increased to 48% from 6 April 2024.
Full details of the tax rates, personal allowances and rate bands can be found at the foot of this article.
Savings income is income such as bank and building society interest. There have been no changes to tax rates or allowances.
For dividends, the changes announced previously will still come into effect so from 6 April 2024, so the dividend allowance will be reduced from £1,000 to £500. There is no change in the dividend tax rates.
A number of changes were made to the tax regime for pensions for 2023/24:
The AA and threshold and adjusted income levels will remain the same for 2024/25.
As previously announced the LA of £1,073,100 will be abolished from 2024/25. Changes have been made to clarify the taxation of lump sums and lump sum death benefits, as well as the tax treatment for overseas pensions, transitional arrangements, and reporting requirements.
The government is freezing the limits on Individual Savings Accounts (ISAs) (£20,000), Junior Individual Savings Accounts (£9,000), Lifetime Individual Savings Accounts (£4,000 excluding government bonus) and Child Trust Funds (£9,000) for 2024/25.
The government announced that it is looking to introduce the UK ISA (from a date yet to be confirmed). This will have a new ISA allowance of £5,000 in addition to the existing ISA allowance and will provide a new tax-free savings opportunity for people to invest in UK quoted companies.
The High-Income Child Benefit Charge (HICBC) is a tax charge that applies to higher earners who receive Child Benefit, or whose partner receives it.
As mentioned, the income threshold at which the HICBC starts to be charged is increasing from £50,000 to £60,000 from April 2024. The rate at which HICBC is charged will be halved from 1% of the Child Benefit payment for every additional £100 above the threshold, to 1% for every £200. This means that Child Benefit will not be fully taxed until individuals have ‘adjusted net income’ of £80,000 or more.
In addition, the government plans to administer the HICBC on a household rather than individual basis by April 2026, with a consultation in due course.
At long last the bullet has been bitten and a radical change to the taxation of non-domiciled individuals living in the UK. From 6 April 2025, the current remittance will be abolished and replaced with a residence-based regime. Individuals who opt into the new system will not pay UK tax on any foreign income and gains arising in their first four years of tax residence, provided they have been non-tax resident for the last ten years. Anyone who has been tax resident in the UK for more than four years will pay UK tax on their worldwide income and gains.
The government will also introduce the following transitional arrangements for existing non-UK domiciled individuals claiming the remittance basis:
Currently there is very little detail of the changes being proposed (which suggests they have been put together in a hurry) and we await the technical details. Almost certainly, these transitional arrangements will not be as straightforward as announced given both the scale of income and gains that might be involved and the complexity of existing legislation. The government will be keen to avoid loopholes that could lead to potential tax avoidance. For that reason, watch this space as more details emerge. It is certainly something we will revisit once more is known about the changes.
Also announced was reform to Overseas Workday Relief for employment duties carried out overseas.
Inheritance Tax (IHT) is currently a domicile-based system and allied with the changes for income tax and gains the intention is to move to a residence-based system, although there is to be consultation on these and no changes to IHT will take effect before 6 April 2025.
Following the reduction in the main rate of Class 1 employee NICs from 12% to 10% from 6 January 2024. a further reduction from 10% to 8% from 6 April 2024, which is less than a month away so this could present a challenge for some payroll software to be ready for an April pay date.
The self-employed generally have to pay two forms of NIC’s being Class 2 and Class 4.
From 6 April 2024 self-employed people with profits above £6,725 will similar to employees who receive earnings up to the Primary Threshold get credit, without paying NICs. that will qualify for the State Pension and other contributory benefits.
Those who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension will continue to be able to do so.
In terms of Class 4 NIC, the main rate will be reduced from 9% to 6% from 6 April 2024.
The rates of tax for company cars remain frozen for 2024/25. Future car benefit rates have been announced for 2025/26 to 2027/28:
The charge for electric cars will rise from 2% to 5% over that period.
For cars with emissions of 75gm/km and above, there will be a 1% rise in 2025/26 only, subject to a maximum of 37%.
From 6 April 2024 the figure used as the basis for calculating the benefit for employees who receive free private fuel from their employers for company cars remains at £27,800.
For 2024/25 the benefit remains £3,960 per van and the van fuel benefit charge where fuel is provided for private use remains £757. If a van cannot in any circumstances emit CO2 by being driven, the cash equivalent is nil.
From April 2026 the payrolling of benefits will become compulsory.
The government has confirmed that the rates of Corporation Tax will remain unchanged, which means that, from April 2024, the rate will stay at 25% for companies with profits over £250,000. The 19% small profits rate will be payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective Corporation Tax rate.
The Full Expensing rules for companies allow a 100% write-off on qualifying expenditure on most plant and machinery (excluding cars) as long as it is unused and not second-hand. The rules were originally designed to be effective for expenditure incurred on or after 1 April 2023 but before 1 April 2026. Similar rules apply to integral features and long life assets at a rate of 50%. The government announced in the Autumn Statement 2023 that both allowances will be made permanent.
The government is to publish draft legislation for consultation to help consider any potential extension to include plant and machinery for leasing.
The Annual Investment Allowance (AIA) is available to both incorporated and unincorporated businesses. It gives a 100% write-off on certain types of plant and machinery up to certain financial limits per 12-month period. The limit remains at £1 million.
The Transfer of Assets Abroad (ToAA) provisions will be amended so that UK resident individuals cannot bypass the legislation, by using a company to transfer assets offshore in order to avoid tax. Transfers of assets by certain companies will be considered a relevant transfer for the purposes of the legislation. The new measure will apply to income arising to persons abroad on or after 6 April 2024.
The Furnished Holiday Lettings (FHL) tax regime will be abolished from April 2025. Draft legislation is to be published and will include anti-forestalling measures that will apply from 6 March 2024. The effect of abolishing the rules will be that short-term furnished holiday lets and longer-term residential lets are treated the same for tax purposes and individuals will no longer need to report the two separately.
Being treated the same as long term rental properties will include restrictions on tax relief for loan interest, not being able to claim capital allowances on equipment in the property, not being able to roll-over a gain on the property into another investment and no longer qualifying for capital gains tax business asset disposal relief (10% capital gains tax rate.)
It is confirmed that the existing Research and Development Expenditure Credit (RDEC) and SME schemes will be merged and apply to expenditure incurred in accounting periods beginning on or after 1 April 2024 being claimed. The rate under the merged scheme will be set at the rate of 20%.
The changes also provide additional relief for loss-making Research and Development (R&D) intensive SMEs through a higher rate of payable tax credit from April 2023, as a feature of the existing SME scheme. Those entitled to this higher rate would, from April 2024, continue to claim under rules similar to the current SME scheme rather than under the new RDEC scheme.
Several other changes will apply to the new regime from April 2024, including R&D claimants will not be able to nominate a third-party to receive R&D tax credit payments, subject to limited exceptions.
The Capital Gains Tax (CGT) rate remains at 10%, up to the balance of the income tax basic rate band is available, and then 20%
Higher rates apply for certain gains, mainly chargeable gains on residential properties, with the exception of any element that qualifies for Private Residence Relief which is being retained. These rates are changed from 18% and 28% in 2023/24 to 18% and 24% in 2024/25.
As announced previously the annual exemption will reduce from £6,000 to £3,000 from 6 April 2024.
Despite much speculation before the Budget, Inheritance Tax (IHT) has not been abolished. In fact, nothing has changed with the nil rate band remaining frozen until at least 5 April 2028. The ‘residence nil rate band’ is also frozen at the current £175,000 level until 5 April 2028.
After many years of having been frozen, the government will increase the VAT registration threshold from £85,000 to £90,000 and the deregistration threshold from £83,000 to £88,000 from 1 April 2024. The government has stated that these new thresholds will be frozen but has not stated for how long. These changes will be of no significance to most businesses.
A number of changes are made to the Stamp Duty Land Tax (SDLT) regime. These include the following:
This much delayed and vastly over budget ‘flagship’ policy, will, despite the concerns of tax advisers and an admission (after many denials) by HMRC that businesses will face extra costs, proceed. The projected implementation date is April 2026. Given the number of postponements as HMRC struggles to get the appropriate IT infrastructure in place, we are still sceptical of the start date after years. HMRC even boast of helpline support but given the difficulty in getting HMRC phone support at present and the cutbacks HMRC are implementing, in this area we won’t hold our breath on this coming to fruition.
Tax Rates – Year Ending 5 April 2025
Income Tax
|
|
Rest of UK |
Scotland |
||
|
Personal allowance |
|
£12,750 |
|
£12,570 |
|
Starter Rate |
- |
- |
19% |
Up to £14,876 |
|
Basic Rate |
20% |
Up to £37,700 |
20% |
Up to £26,561 |
|
Intermediate Rate |
- |
- |
21% |
Up to £43,662 |
|
Higher Rate |
40% |
Up to £125,140 |
42% |
Up to £75,000 |
|
Advanced Rate |
- |
|
45% |
Up to £125,140 |
|
Additional Rate |
45% |
Over £125,140 |
48% |
Over £125,140 |
For Scottish taxpayers, the Scottish tax rates apply to non-savings income, and the UK rates apply to savings income.
Dividend Tax Rates
|
Tax-Free Allowance |
£500 |
|
Basic |
8.75% |
|
Higher |
33.75% |
|
Additional Rate |
39.35% |
Capital Gains Tax
The annual exemption £3,000
|
|
Main Rate |
Residential Property |
|
Basic |
10% |
18% |
|
Higher |
20% |
24% |
National Insurance contributions (NIC)
Employee and Employer NIC
|
|
Monthly Threshold |
Rate |
|
Employee NIC – Main Rate |
Between £4,189 and £1,048 |
8% |
|
Employee NIC – Additional Rate |
Over £4,189 |
2% |
|
Employer NIC |
Over £758 |
13.8% |
Self-employed NIC
|
|
Threshold |
Rate |
|
Class 2 NIC |
Between £12,570 and £6,725 |
Abolished |
|
Class 4 NIC – Main Rate |
Between £50,270 and £12,570 |
6% |
|
Class 4 NIC – Additional Rate |
Over £50,270 |
2% |
National Living Wage
|
National Living Wage |
£11.44 per hour |
|
Age 18 to 20 |
£8.60 per hour |
|
Under 18’s |
£6.40 per hour |
|
Apprentice’s |
£6.40 per hour |
VAT Registration Threshold
The threshold for registering for VAT will increase from 1 April 2024 to £90,000.
Corporation Tax Rates
|
Companies with profits up to £50,000 |
19% |
|
Companies with profits of more than £250,000 |
25% |
Those with profits in between these thresholds will be subject to a marginal rate.
Above thresholds are subject to the associated company rules
ISA Limits
In addition to the standard £20,000 ISA limit, a £5,000 ISA Limit for UK Equities has been introduced.
Pension Contributions
|
Annual Allowance |
£60,000 |
|
|
|
|
Tapering Adjustment: |
|
|
Threshold Income |
£200,000 |
|
Adjusted Income |
£260,000 |
|
Tapered allowance limit |
£10,000 |
|
|
|
|
Lifetime allowance |
Abolished |
High Income Child benefit Charge
|
Threshold Income |
£60,000 |
|
Full Repayment Limit |
£80,000 |
Inheritance Tax
|
Standard Rate |
40% |
|
Nil Rate Band |
£325.000 |
|
Residence Nil Rate Band* |
£175,000 |
*Tapered for estates with a value of £2million or more
