Spring Budget 2024 - Personal Tax Summary

TL;DR Summary

• Personal income tax rates and allowances will remain unchanged.
• More reductions in National Insurance Contributions, starting April 2024.
• High Income Child Benefit Charge threshold will rise to £60,000 from April 2024.
• The highest Capital Gains Tax rate on residential properties will decrease from 28% to 24% from April 2024.
• Favorable tax conditions for furnished holiday lettings will end in April 2025.
• The preferential tax status for non-domiciled individuals will cease in April 2025, moving to a residence-based tax system.
• The income threshold before you must register for VAT will increase to £90,000 from 1 April 2024.

Non Domicile Status (& Remittance Basis)

Important for individuals/expats coming into the UK, or those living in the UK currently who do not see the UK as their ‘permanent home’.

Starting from 6 April 2025, we will be shifting from the current remittance basis to a residence-based regime. Here's what's changing:

• Newcomers to the UK, who haven't lived in the country for at least 10 years before becoming residents, will enjoy a 4-year period where they won't be taxed on Foreign Income and Gains (FIG) they bring into the UK.
• Overseas workdays relief will still be available for the first 3 years without needing to keep earnings outside the UK.
• Annual Opt-In: Eligible individuals must choose to use this FIG regime each year but will forfeit their UK personal allowance and capital gains tax exemption.

Transitional Rules:

• People who've been in the UK for fewer than 4 years by 6 April 2025, after being abroad for 10 years, can use the new regime for the remainder of the 4-year period.
• Some will still be able to claim overseas workday relief in 2025/26.
• For 2025/26, there's a 50% tax on foreign income (but full tax on gains), shifting to worldwide taxation from 2026/27.
• A 2-year Temporary Repatriation Facility allows for a reduced 12% tax rate on pre-6 April 2025 FIG brought to the UK, with some exceptions and relaxations.

National Insurance

For all workers in the UK, whether employed or self-employed, the Chancellor has detailed significant cuts to National Insurance Contributions (NIC):

• The main rate of Employees’ Class 1 NIC will decrease from 12% to 8% by 6 April 2024, following a stepwise reduction starting from 6 January 2024.
• For the self-employed, Class 4 NIC rates are set to drop from 9% to 6% starting from 6 April 2024, surpassing the previously announced reduction to 8%.

High Income Child Benefit Charge

Starting from April 2024, the rules for the High Income Child Benefit Charge (HICBC) are changing. Right now, families start to pay back some of their child benefit when one parent earns more than £50,000. Effectively owing 1% of their benefit for every £100 earned between £50,000 to £60,000. So at £60,000 they would be required to pay back 100% of the child benefit payments they received. Soon, this will only start once a parent earns over £60,000, and the full benefit isn't lost unless they earn more than £80,000.

Capital Gains Tax

In a move to adjust Capital Gains Tax (CGT) regulations, the 2022 Autumn Statement announced a significant reduction in the CGT annual exempt amount, lowering it from £6,000 in the 2023/24 fiscal year to £3,000 for 2024/25. Meanwhile, CGT rates remain at 10% for basic rate taxpayers and 20% for higher rate taxpayers on general assets.

Furnished Holiday Lets

The preferential tax treatment for Furnished Holiday Lettings (FHL) will be stopped from 6 April 2025. This decision aims to balance the tax advantages between short-term holiday lettings and long-term residential rentals, encouraging more properties to be available for residents rather than tourists.

New ISA

For the 2024/25 tax year, the investment limits for ISAs will stay consistent with previous years: £20,000 for a standard adult ISA, of which up to £4,000 can be allocated to a Lifetime ISA, a figure that has remained unchanged since the 2017/18 tax year. Additionally, the investment cap for both Junior ISAs and Child Trust Funds will continue at £9,000.

Pension Contributions

Last year's Budget saw a significant uplift in the limits for tax-advantaged pension savings, with the Annual Allowance increasing to £60,000 and the Lifetime Allowance (LTA) Charge being abolished. No new adjustments were made in the most recent 2024 Spring Budget.

Other incoming changes (April 2024)

While the latest Budget didn't introduce new measures, two significant changes are set to take effect from 6 April 2024, impacting self-employed individuals and unincorporated businesses:

• Transition to Fiscal Year Basis for Self-Employed Trading Profits: Starting in the 2024/25 tax year, the assessment of self-employed trading profits will align with the fiscal year, regardless of a business's chosen accounting date. This shift follows a transitional year in 2023/24. Businesses with accounting dates divergent from 31 March or 5 April need to prepare for this adjustment, aiming to streamline tax assessments and reduce complexity.
• Default Cash Basis Accounting for Unincorporated Businesses: The cash basis method will become the standard for calculating trading profits for unincorporated businesses in the 2024/25 tax year. While businesses can still opt for accruals accounting if preferred, this change suggests evaluating the most beneficial accounting method. The cash basis simplifies income and expenses recording, potentially offering a more straightforward approach for many self-employed traders.
• Tax Filing Requirements: For the 2023/24 tax year, individuals earning over £150,000 are mandated to file a self-assessment tax return. However, the 2023 Autumn Statement brought a significant change for the 2024/25 tax year, exempting those whose entire tax liability is settled through the PAYE system from the requirement to file a self-assessment.