The Chancellor Jeremy Hunt delivered the Spring Budget on 6 March 2024.

With many of the measures having been leaked earlier in the week, there were few surprises to come out of his speech. Nevertheless, it was an eventful Budget from a personal tax perspective, with many significant changes announced for individuals. Further details will be published by the government in the coming days, but here are the main headlines that individuals should be aware of.

Abolition of the Furnished Holiday Let Regime

The Furnished Holiday Let (“FHL”) regime has seen various changes over the years, the main one being in 2012, when the ability to set losses from FHL businesses against other income was removed. However, the regime still provides helpful tax advantages, such as being able to claim mortgage interest as a deduction in full, as well as the ability to claim certain capital gains tax reliefs upon sale.

The regime is now set to be abolished from 6 April 2025 in an attempt to level the playing field between short and long term lets, with draft legislation to be published in due course.

The Chancellor also announced the abolition of multiple dwellings relief from 1 June 2024 – a bulk purchase relief on stamp duty for purchases of more than one dwelling in one transaction – however, this only affects properties purchased in England and Northern Ireland, with Scotland and Wales having their own land and buildings taxes.

A decrease in Capital Gains Tax Rates for residential property

The Capital Gains Tax (“CGT”) rate payable on residential properties will be reduced from 28% to 24% for higher rate taxpayers from 6 April 2024. This change is being implemented to support the housing market, with the hope that landlords, who have been hit with many stealth tax rises in recent years, will be encouraged to sell up, thereby making more homes available to buy. The lower rate (for gains that fall within an individual’s basic rate band) will remain at 18%.

Changes to the high-income child benefit rules

Campaigners have long since called for a reform to the unfair high income child benefit rules (currently a single parent earning £60,000 will lose all of their child benefit by way of a tax charge, however a couple earning up to £100,000 between them not have to repay any of the benefit.) The Chancellor has announced a forthcoming consultation on the rules, proposing a shift towards assessing based on household income.

In the meantime, the threshold for the charge being triggered will be increased from £50,000 to £60,000 from April 2024, with the benefit not being fully withdrawn until an individual earns £80,000 or more (currently £60,000.)

Cuts to National Insurance for both employees and the self-employed

It was almost certain that the Chancellor would either reduce income tax rates or National Insurance. In the end, he chose the latter, with Class 1 NIC being reduced by another 2% from 6 April 2024 (on the back of an initial 2% cut in January of this year.) Class 4 NIC, which is paid by the self employed, will also be reduced from (9% to 6%.)

Reform of the ‘non-dom’ regime

In what I’m sure will be an anxiety inducing announcement for clients and tax advisers alike, the Chancellor announced a radical change to the current tax regime for non domiciled individuals. The current system is to be abolished and replaced with a residency-based system. Those coming to the UK will pay no tax for the first 4 years but will then pay the same tax as those who are domiciled in the UK. This is arguably the biggest shake up to our tax system since the Statutory Residence Test was introduced in 2013, and while there will be transition arrangements for those currently claiming the Remittance Basis, we would advise anyone affected to start taking advice as soon as possible.

What about inheritance tax?

Yet again, the Chancellor failed to make any announcements on Inheritance Tax (“IHT”) during his speech. However, we now know from reading the Budget report that the government is intending to move to a residence-based regime for IHT, but we don’t yet know what that will look like. What we do know is that no changes to IHT will take affect before 6 April 2025 and that the treatment of non-UK assets settled into trust by a non-domiciled settlor before 2025 will not change.

With a general election on the horizon, it remains to be seen how many of these proposals will stand the test of time. Watch this space…

If you would like to talk through the implications the Budget may have for your own tax planning please get in touch with our private tax team who will be happy to help.

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