Spring Budget 2024

Spring Budget 2024

Chancellor Jeremy Hunt delivered the 2024 Spring Budget on Wednesday 6th March, promising an update on umbrella companies’ IR35 compliance and announcing a two-percentage point cut to national insurance as well as abolishing the current non-dom tax system, among other measures.

The Budget’s headline-grabbing announcements included a drop in employee National Insurance (NI) contributions, abolishing the current tax status of non-UK domiciled individuals (so-called non-doms), and freezes on alcohol and fuel duty. There were also changes to VAT thresholds and capital allowances for holiday let owners.

The full budget report also included a brief update on the tackling of non-compliant umbrella companies, firms which employ contractors on temporary assignments usually through a recruitment company, saying an update would be provided on this year’s Tax Administration and Maintenance Day on 18th April, following a consultation that concluded last year. Guidance for workers and businesses who use umbrella companies will also be published later in the summer, it added. The government also plans to tackle tax non-compliance generally by investing in HMRC’s ability to collect outstanding tax debts, which will stand at over £4.5 billion by 2028-29, it said.

No changes were announced to rates or rules around R&D tax relief in the Budget, but HMRC has announced a consultation into governance of the tax advisory industry, to run 6th March to 29th May. Titled ‘Raising standards in the tax relief advice market’, possible outcomes include requiring all tax advisors to be part of a professional body, be supervised by HMRC, or the setting up of a new independent regulator.

"The Chancellor announced an increase to the VAT registration threshold to £90,000 and the VAT deregistration threshold to £88,000, effective from 1st April"

On capital allowances, there were two changes. Firstly, the abolition of tax relief for furnished holiday lets from 6 April 2025. The change will mean that short and long-term lets will be treated the same for tax purposes and, therefore, holidays lets will no longer be eligible for capital allowances. More clarification on how the change will affect property sales will become clearer when the draft legislation is published.

Further, the Chancellor announced an increase to the VAT registration threshold to £90,000 and the VAT deregistration threshold to £88,000, effective from 1st April.

Other announcements included employee’s National insurance contributions dropping from 10% to 8% from 6th April, with those for the self-employed cut from 9% to 6%; meaning the average worker will save an additional around £450 a year on their tax bill, Hunt said. The change comes off the back of a similar cut to income tax unveiled in last year’s Autumn Statement, which came into effect in January. The Chancellor claims the average personal tax bill will drop to its lowest level since 1975 when the changes take effect from the beginning of the new tax year.

Hunt began his speech by announcing that the current freeze on alcohol duty will be extended to February 2025. Along a similar vein, fuel duty cuts of 5p will also be extended for a further 12 months.

The current tax status of non-UK domiciled individuals (so-called non-doms) is to be abolished from 6th April 2025, impacting UK residents whose home for tax purposes is overseas. The new system will see anyone who has been a tax resident in the UK for more than four years pay UK income tax on their foreign earnings. Ending non-dom tax status will generate £2.7 billion for the treasury, Hunt added.