There was no doubt that this was a Budget for an election year.
While stretched public finances and inflationary pressures limited the Chancellor’s scope for pre-election giveaways, much of the Budget speech rhetoric was framed around economic growth and promises of future tax cuts.
However, the actual tax cuts announced were fairly modest. There was the anticipated announcement of a further 2% cut in National Insurance, alongside a 4% reduction on the top rate of CGT on residential properties. Measures were also announced to mitigate the effects of the High Income Child Benefit Charge, the abolition of the Non-Dom tax rules, and the scrapping of the favourable tax treatment of Furnished Holiday Lettings Relief.
We summarise here the main measures affecting individuals.
Further Reduction in National Insurance (NIC)
From 6 April, the main rate of NIC that employees pay will reduce to 8%. This represents a further 2% reduction, following on from the reduction from 12% to 10% that was made in January this year.
The main rate that the self-employed pay is also to be reduced by a further 2%, beyond the 1% reduction announced last year. That means that for the 2024/25 tax year, the rate will be 6%, compared to 9% in the previous tax year. The small Class 2 National Insurance payments also cease from April 2024.
Changes to the High Income Child Benefit Charge
It has long been recognised that the current system penalises single-income households, or those with one taxpayer over the £50,000 threshold, whereas a household with two people earning £49,000 each wouldn’t have to pay the charge.
To address this, from April 2026, the system will be based on household rather than individual incomes.
As an immediate measure, and in recognition of this unfairness, from April 2024, the Government will raise the threshold for the High Income Child Benefit Charge from £50,000 to £60,000. Additionally, the rate of the charge will be halved, so Child Benefit will not be fully withdrawn until an income of £80,000 is reached.
Reduction in Capital Gains Tax (CGT) on residential properties
For a number of years now, the gains on residential property have been taxed at higher rates than other gains, as well as the gain needing to be reported and the tax paid within 60 days of sale.
In what was, perhaps surprisingly, introduced as a measure to increase tax collected, the Chancellor announced a reduction in the higher rate of CGT on such disposals from 28% to 24%, effective for sales completing after 5 April 2024. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band.
This change is intended to encourage landlords and second home owners to sell their properties, not only increasing the overall tax take but also making more properties available for various buyers, including those looking to get on the housing ladder for the first time.
Private Residence Relief will continue to apply, meaning the vast majority of residential property disposals will not be subject to CGT.
Scrapping of Furnished Holiday Let tax reliefs
This relief, which has Income Tax and Capital Gains Tax benefits, as well as allowing pension contributions to be made based on earnings from the activity, will be scrapped from April 2025.
This will mean a significant increase in Income Tax on profits as the current rules permit full relief for mortgage interest and the ability to claim Capital Allowances. In addition, a 10% Capital Gains Tax rate on sale is available in certain circumstances.
In comparison, normal rental income rules restrict deductions for mortgage interest, deductions for capital items purchased, and future sales of properties could be subject to a 24% tax rate as opposed to a 10% rate.
Changes to Stamp Duty Land Tax (SDLT)
Multiple Dwellings Relief, which provided relief for bulk purchases, will be abolished from 1 June 2024.
Changes for Non-Doms
Domicile has always been a complex area and has become increasingly political. From 6 April 2025, a new, hopefully simpler, regime will be introduced under which individuals will pay UK tax on any foreign income and gains arising after four years of tax residence (previously 15 years).
There are also intentions to move to a residence-based regime for Inheritance Tax.
Creation of the British ISA
The British ISA will be a new savings product designed to encourage investment in UK-focused assets. The UK ISA will offer a £5,000 allowance in addition to the existing ISA allowance.
British Savings Bonds
These bonds, scheduled for launch in April 2024, will be offered through National Savings and Investments (NS&I). The British Savings Bonds will provide a guaranteed interest rate fixed for three years.
Alcohol and Fuel Duty
Alcohol duty was frozen until February 2025, and the fuel duty freeze was extended to 2024/25, maintaining the existing 5p cut.
To find out more or discuss your individual tax needs, please contact a member of the Tax team on 0333 123 7171.
