Ben Handley
Private Clients and OMB, Tax Partner
Spring Budget Webinar 2024
Watch our Spring Budget webinar providing an in-depth analysis of the Chancellor’s announcements and what the Spring Budget means for you and your business.
WATCH NOWWe have broken down announcements from the Spring Budget into sections – you can find in depth analysis below, under the headings of Personal Taxes. Corporate Taxes, Indirect Taxes, Employment Taxes, Other Taxes and Industry Impacts.
Our tax experts Caroline Harwood, Liam O’Doherty, Martyne Pearson and Ben Handley, joined by Nina Skero, Chief Executive from the Centre for Economics and Business Research answer your questions on the 2024 Spring Budget. Watch the Spring Budget webinar here.
The government announced proposals to abolish the current tax treatment for UK resident non-domiciled individuals (non-doms) from 6 April 2025. ‘Non-dom status’ enabled UK resident individuals whose permanent home is outside the UK to benefit from the ‘remittance basis’, effectively exempting their foreign income and gains (FIG) from UK taxation unless remitted to the UK. It also offered protection from Inheritance Tax on their non-UK sited assets.
From 6 April 2025, the current regime will be replaced with a new residence-based test. The new regime will be available for four years starting from 6 April 2025 or the first tax year in which the individual becomes UK resident if later. It will be available to any individuals who have been non-UK resident for at least the previous ten tax years. During these four years, new arrivals to the UK will not be subject to tax on their FIG, nor on distributions from non-resident trusts. These can be brought into the UK freely without attracting a tax charge. Those opting into the four-year FIG regime will lose their entitlement to personal allowances and annual exempt amounts for CGT.
After the initial four years, individuals will be taxed on their worldwide income and gains in accordance with the normal tax rules for UK residents.
These are significant changes to the tax regime for non-doms, and although there is a suggestion that the regime has been simplified, the rules will still produce a variety of scenarios with several layers of complexity. The transitional provisions provide time for some individuals to arrange their affairs before the new rules take effect.
Get more detail and expert analysis on the abolition of non-dom status here.
High Income Child Benefit Charge
Parents will receive Child Benefit at the following rates from April 2024: £25.60 a week (£1,331 a year) for the eldest child and £16.95 a week (£881 a year) for additional children.
Currently, if either partner’s income is over £50,000, then the High Income Child Benefit Charge (HICBC) applies to claw back the Child Benefit, such that it is fully re-payable once your income is over £60,000. You are required to complete a self-assessment tax return to pay this charge.
From 6 April 2024 the threshold will increase to £60,000 with an extended taper so that the Child Benefit will be fully repayable once your income is over £80,000. The Chancellor also announced that the clawback test will be moved to a total “household income” based system from April 2026, but changes to HMRC data gathering are required to facilitate this.
The 2024 increase to the threshold will mean that the marginal effective rate of tax (ie the accumulation of the HICBC, income tax and NIC) on incomes above the new £60,000 threshold will be lower – reducing the disincentive for parents to earn more. In time, the future move to a “household income” based system should also make the system fairer to families with one person with a high income versus those with two people working with an income just below the threshold – although it may prove difficult for HMRC to implement.
The Chancellor confirmed widely expected cuts to National Insurance Contributions and suggested that future moves to reduce it further are intended.
Class 1 changes
For the employed, Class 1 NICs apply from an annual lower threshold of £12,570 to an annual higher threshold of £50,270 - currently at a rate of 10% (reduced from 12% in the Autumn statement with effect from 6 January this year). For those earning above this level, the rate remains at 2% on all additional earnings.
From 6 April 2024 the main rate will drop a further 2% to 8%, which will generate a maximum saving of £63 per month thereafter (£754 per tax year).
Employers also pay NICs, currently at a rate of 13.8% over the lower threshold, but no changes have been announced so this rate will remain.
This further reduction will provide another welcome financial uplift for employees and may relieve some current pressure on employers to offer wage increases.
Self-employment changes
For the self-employed, Class 4 NIC applies from an annual lower threshold of £12,570 to an annual higher threshold of £50,270 - currently at a rate of 9%. This rate was due to reduce to 8% with effect from 6 April 2024 this year. For those earning above this level, the rate remains at 2% on all additional profits.
From 6 April 2024, the rate will instead reduce by a further 2% to 6%. If you are currently paying Class 4 NIC at 9%, this represents a tax saving of £30 for every £1,000 of profit in the main Class 4 NIC ban up to a maximum of £1,131 per year. The government has already abolished Class 2 NIC from 6 April 2024, so the combined changes will offer a welcome financial uplift for the new tax year.
Capital Gains Tax on property disposals
Residential property sold for a gain is liable to capital gains tax (CGT); unless it is the sale of your main residence, which is exempt from CGT. Where a property is not exempt then the gain will be taxable in full. If the property was not always your only main residence, then a portion of the gain will be taxable.
Currently, residential property gains are taxed at 18% for gains that fall within the basic rate band and 28% thereafter. The Chancellor announced today the higher rate will be reduced to 24% for property sales that exchange on or after 6 April 2024.
The 60-day reporting requirement runs from completion, so it will be important to be aware that property returns being submitted from 6 April 2024 may still be required to use the 28% rate if the sale exchanged on or before 5 April 2024.
Landlords impacted by the Chancellor abolishing the Furnished Holiday Lets preferential tax regime from April 2025 who choose to sell their property after 6 April 2024 will benefit from the lower rate.
Furnished Holiday Lettings
For many years, the furnished holiday lettings regime has treated the provision of qualifying residential accommodation by way of short-term lettings as a deemed trade for certain tax purposes and, as a result, such businesses have been a common feature of seaside towns.
It was announced in the Budget that this regime will be abolished from 6 April 2025. This will mean that furnished holiday lettings will be treated as property investment businesses from 6 April 2025, with the result that the following tax benefits of being treated as a trade will be lost:
The Budget included several announcements for private client investors. Taken together these three measures below look to encourage investing by individuals and create a stronger savings and investment culture. The UK ISA and NS&I British saving bond will inject money into British business from individual investors.
You should take independent investment advice before making investment decisions.
UK ISA
The Government has published a consultation on a new UK ISA with its own £5,000 allowance. This is in addition to the current allowance of £20,000, which applies across cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs and Lifetime ISAs (subject to its own £4,000 limit). The consultation runs until 6 June 2024 and is looking for responses on how to define the investments that could be included in an UK ISA.
ISAs offer a tax-free saving opportunity, so for those who already utilise the £20,000 annual allowance this may offer a further opportunity for tax-free savings. With tax thresholds and personal allowances frozen, this may be particularly relevant to some higher earners.
NS&I British saving bond
From early April 2024, NS&I will launch a British saving bond. This will offer investors a guaranteed interest rate fixed for three years on investments between £500 and £1 million. Like all savings from NS&I, money invested will be backed by HM Treasury.
This will be available as either growth bonds or income bonds: it will be important to understand the different tax treatment of each of these once the bond has been launched. Previous growth bonds have paid their interest in a lump sum at maturity (i.e. rather than being paid annually), and depending on your personal circumstances, this could impact the total tax due on your investment.
NatWest sale
The Government intends to sell part of its shareholding in NatWest, directly to individual investors. This forms part of the Government’s plan to fully sell its shares by 2025/26. The sale could take place this summer, subject to market conditions.
Following the Supreme Court ruling in 2023 in favour of the taxpayer in the Fisher case, the government has acted to close a lacuna in the Transfer of Assets Abroad legislation.
UK-resident individuals will no longer be able to bypass the provisions by using a company to transfer assets offshore in order to avoid tax.
The change will ensure that a transfer made via a company, in which the individual is an owner or has a financial interest, will be considered a ‘relevant transfer’ by that individual for the purposes of the legislation. This will take effect for income arising to a person abroad from 6 April 2024.
The government confirmed that full expensing, a 100% first year capital allowance for expenditure on main pool plant and machinery, and a 50% first year capital allowance for special rate allowances, would be made permanent for companies subject to corporation tax.
It was also announced that a working group would be formed to consider the extension of full expensing to assets for leasing where the lessor is treated as the owner of the asset for capital allowances purposes. Plant and machinery provided for leasing is currently specifically excluded from qualifying for first year allowances, and therefore full expensing, except for specific rules regarding leasing of background plant and machinery within a building.
The Chancellor has now announced that draft legislation will be published shortly, with the intention of extending full expensing to assets for leasing. However, a start date is unclear - the Chancellor advised that this would be introduced “when fiscal conditions allow”.
This amendment is welcome and would support the leasing sector to access the benefits of full expensing. It will be interesting to see the draft legislation and whether any types of leasing are excluded from the full expensing rules.
Following his Mansion House speech last year, the Chancellor has announced a consultation in relation to the proposed design of an intermittent trading venue for private companies. The Private Intermittent Securities and Capital Exchange System (PISCES) will be a bridge between private and public markets offering liquidity in the shares of private companies without the expense and regulatory burden of an IPO. PISCES is designed to support the growth of UK private companies and encourage companies to grow and stay in the UK.
PISCES will provide secondary trading facilities for eligible private companies’ shares at pre-determined intervals. New institutional investors will be able to buy into a company and existing investors or staff realise some of their investment through an auction facility. Most retail investors will be prohibited from trading at least during the trial phase of the PISCES platform given the increased risks. PISCES will be for trading existing shares only and not capital raising through the issue of new shares. Companies using PISCES may find it easier to attract investment privately by connecting them to a wider group of investors as the company grows.
The potential benefits for participating companies include the ability to scale up and to attract new investors as well as improving liquidity for some existing shareholders. Investors will gain access to a wider variety of investee companies and benefit from a greater level of transparency and efficiency than with a private company. This is an exciting opportunity for pre-IPO companies in the UK.
The government is proposing to launch the platform through a financial markets infrastructure (FMI) sandbox under the Financial Services and Markets Act 2023. The Government process will start by gathering feedback from stakeholders on the design of the sandbox regulatory regime before collating the feedback and finalising its approach later in the year.
Since the 2023 Autumn Statement, the Government has been working with local authorities to devise further plans around how local growth and investment will be driven in each Investment Zone.
Further details have now been announced for 6 of the 12 planned Investment Zones, these being Greater Manchester, Liverpool City Region, North East of England, South Yorkshire, West Midlands and West Yorkshire. Announcements are expected around the Tees Valley and East Midlands Investment Zones soon.
The announcements outline the sectors of focus for each of these Investment Zones which include the advanced manufacturing, materials, life sciences, automotive, digital and creative sectors. Details have also been released around how each Investment Zone will make use of the £160million funding envelope. The delivery arrangements continue to be a work in progress ahead of the release of funding and official designation of tax relief sites. In the interim, these initial details will be welcomed by investors that are considering making use of these Investment Zones.
In addition, the Investment Zone programme has now been extended from 5 to 10 years in Scotland and Wales in line with the extension of the Investment Zone programme in England.
The Chancellor announced a range of tax measures to support the UK’s creative sector.
Film and TV
A new Independent Film Tax Credit (IFTC) will be introduced as part of the Audio-Visual Expenditure Credit (AVEC) provisions, effective for films commencing principal photography from April 2024. The credit will be 53% of qualifying expenditure incurred on films with budgets under £15 million that receive the new British Film Institute accreditation.
Under the IFTC, qualifying expenditure will be capped at 80% of core expenditure, meaning it could be worth up to £6.36m for a qualifying film.
From April 2025, visual effect costs for film and high-end TV will receive an increased tax credit rate of 39% (up from 34%) under the AVEC provisions, as well as the removal of the 80% cap on qualifying expenditure. In addition, a 40% relief from business rates will be introduced for eligible film studios in England until 2034.
Theatres, orchestras, museums, and galleries
The previously announced higher rates of tax reliefs for static and touring shows were due to be phased down to 20% or 25% respectively by 2026/27. The Chancellor has confirmed that these will remain at 40% and 45% respectively on a permanent basis to provide long term support.
Research and Development tax reliefs
HMRC will establish an expert advisory panel to support the administration of the R&D tax reliefs. The panel will provide insights into the cutting-edge R&D occurring, in sectors such life sciences and technology, and work with HMRC to ensure guidance remains up to date and provides clarity.
Recovery Loan Scheme
The Recovery Loan Scheme, which offers a 70% government guarantee on loans to SMEs of up to £2 million in Great Britain and £1 million in Northern Ireland, has been renamed the Growth Guarantee Scheme and will be extended until the end of March 2026.
Business rates
The government has published a summary of responses to its Business Rates Avoidance and Evasion Consultation, and has committed to:
Eligible film studios in England will receive a 40% reduction on gross business rates bills until 2034, worth around £470 million over the next 10 years. The relief will be implemented as soon as possible, and bills will be backdated to 1 April 2024. Studios will remain eligible for Improvement Relief. English Local Authorities will be fully compensated for the loss of income as a result of this relief and will receive new burdens funding for administrative and IT costs.
Energy Profits Levy
Because gas prices are forecast to remain abnormally high until at least 2028-29, the government will extend the end date of the Energy Profits Levy by a year, to 31 March 2029. The Spring Finance Bill will include legislation to disapply the levy when prices return to normal.
Economic Crime Levy
The government will increase the Economic Crime Levy paid by very large businesses with UK revenue greater than £1 billion, and which are regulated for anti-money laundering purposes, under the Economic Crime (Anti-Money Laundering) Levy. The charge for these entities will rise from £250,000 to £500,000 per annum from the 2024-25 tax year onwards.
There will be no change to the charge for small entities which remain exempt, medium entities which will continue to pay £10,000 or large entities which will continue to pay £36,000.
To ease the burden on small businesses, the government has announced that, for the first time in seven years, it will increase the VAT registration threshold. The threshold goes from £85,000 to £90,000, and the deregistration threshold from £83,000 to £88,000. These changes will apply from 1 April 2024. The government estimates that over 28,000 businesses will benefit from no longer being VAT-registered in 2024-25.
DIY builders scheme - power to request evidence
HMRC plans to further amend the DIY builders scheme, which allows those building their own home to claim a VAT credit on building materials. The scheme was digitised in 2023, and a requirement to submit invoices with a claim removed.
The amendment, to take effect from the date of Royal Assent to the Spring Finance Bill 2024, introduces a new power in primary legislation to underpin existing operational practice. This will allow HMRC to request further evidential documentation, including invoices, in order to validate a DIY claim.
VAT Treatment of Private Hire Vehicles – Upcoming consultation
The government has announced a consultation in April 2024 into the impact of the July 2023 High Court ruling in Uber Britannia Ltd v Sefton MBC. This ruling requires operators to act as principal in supplying taxi services outside London.
This has the potential to impact the VAT position of operators, many of whom currently apply agency arrangements on behalf of largely non-VAT registered drivers. The government is committed to exploring a range of viable options to ensure that the court ruling does not have any undue adverse effects on the private hire vehicle sector and its passengers.
VAT Retail Export Scheme – no immediate re-introduction
Despite much lobbying, the government has not yet announced the re-introduction of tax-free shopping that was removed after 31 December 2020. The government has received analysis by the Office for Budget Responsibility (OBR) and will consider those findings alongside industry representations and broader data. The government says it welcomes further representation on this relief.
Proposed reform of Terminal Markets Order
The government has announced proposed amendments to the VAT Terminal Markets Order (TMO). The TMO is a revenue-neutral tax simplification measure for certain wholesale commodity transactions made by members on named commodity exchanges or market associations, called “Terminal Markets”, where certain supplies can be zero rated.
The government plans to update the underpinning TMO legislation to allow for further reform including bringing trades in carbon credits within the scope of the TMO.
Alcohol Duty freeze
The government has announced an extension by a further 6 months to the six-month freeze on alcohol duty, until 1 February 2025.
Fuel duty changes
The government has announced that it is freezing fuel duty rates for 2024-25. The temporary 5p cut in fuel duty rates will be extended until March 2025. The government has also announced that, following review, it will maintain the difference between road fuel gas and diesel duty rates until 2032.
Air Passenger duty (APD) rate changes
The government has announced that it is making a one-off adjustment to rates of Air Passenger Duty (APD) on non-economy passengers to account for high inflation in recent years and help maintain the value of APD in real terms. Economy rates on domestic or short-haul flights will remain frozen until 2025.
The 2025-26 APD rates for economy passengers will increase in line with forecast RPI, rounded to the nearest pound. Rates for those flying premium economy, business and first class, and for private jet passengers, will also increase by forecast RPI and will be further adjusted for recent high inflation to help maintain their value in real terms.
Carbon Border Adjustment Mechanism (CBAM) consultation
The government had announced plans to introduce a CBAM from 1 January 2027. This levy will apply in certain circumstances to relevant goods imported in the aluminium, cement, ceramics, fertiliser, glass, hydrogen and iron & steel sectors. The government has now announced there will be a further consultation in 2024.
Vaping Products Duty – new levy proposed
The government has announced a consultation into a proposed new levy on vaping products from 1 October 2026. The consultation implies that such a levy will apply at the import or UK manufacturing stage. This is similar to the regime announced for the planned Deposit Return Scheme and there would be processes to ensure credits and drawbacks of duty would apply. The government will also introduce a one-off tobacco duty increase of £2.00 per 100 cigarettes or 50 grams of tobacco at the same time.
Umbrella companies
Umbrella companies typically employ contractors who work on temporary contract assignments. The company manages payroll, deducting employment taxes and NIC and manages payroll compliance and administrative tasks for a fee, typically paid by the contractor. Many provide a valuable service and are completely legitimate.
However, there is perceived abuse and the government wishes to crack down on non-compliance in the umbrella sector. Following the recent consultation on tackling non-compliance in the umbrella company market, many had been expecting an update on further action in the Budget.
Any action will now take place on Tax Administration and Maintenance Day on 18 April 2024. New guidance will be published in Summer 2024 to support workers and other businesses who use umbrella companies. We will continue to monitor development and publish more information and analysis in due course.
After much speculation, the Chancellor announced the abolition of the current ‘non-dom’ (remittance basis) tax regime from the end of the 2024/25 UK tax year. Fortunately, its replacement, the Foreign Income and Gains (FIG) regime, still allows internationally mobile employees (IMEs), and their employers, where the IMEs are tax equalised, crucial access to valuable expatriate tax concessions. The FIG regime will apply for a period of four UK tax years for individuals that have not been tax resident in the UK for ten UK tax years prior to establishing tax residency.
Overseas workdays relief (OWR) will remain available for its current three UK tax years and there is no indication that employers will cease to be able to operate section 690s on the reduced percentage of earnings agreed with HMRC. Under the FIG regime, employees will be taxed only on their UK income and gains, but not on their foreign income and gains.
Unlike previously, under the FIG regime, the attractiveness of OWR is enhanced by removing the need for foreign income (including earnings for overseas workdays) and gains being retained outside the UK. This reduces the complexity for IMEs setting up and handling their banking arrangements, and makes it easier for them to claim the maximum OWR based on their overseas travel. As currently, NIC will continue to be due on all earnings regardless of the OWR, unless there is a valid exemption from NIC.
Employees can decide to ‘opt’ into the FIG regime annually, and though it applies for four tax years, there may be scope for this to be extended if the employee has been split-year resident or treaty non-resident for any of their first four UK tax years.
We will have to await the release of further guidance and legislation to establish how other expatriate tax reliefs available to non-doms, such as the foreign travel rules (relocation travel, home leave and travel between overseas and a UK workplace) will be impacted, and how this will impact UK residents, but previously non-dom employees, and their employers where dual contract arrangements are in place.
Employers will require reviews and guidance on how they, and their current IMEs are impacted by the proposed changes, and how future IMEs can access the valuable tax reliefs that are still available. The timing of assignments, subject to commercial considerations, will also require careful consideration.
Collecting tax debt
As of 31 December 2023, HMRC was owed around £45.7bn in unpaid taxes. The Government has announced a £140m investment in HMRC’s ability to manage tax debts. The additional funds should expand the capacity of HMRC’s debt management and banking team with the aim of collecting the tax due and helping individuals and businesses to repay their debt faster.
HMRC is also improving and simplifying its digital services to support Income Tax Self-Assessment taxpayers seeking to pay tax in instalments from September 2025.
Multiple Dwellings Relief
Multiple Dwellings Relief (MDR) - the bulk purchase relief for residential property - will be abolished for purchases with an effective date (normally completion) on or after 1 June 2024. However, purchases where contracts were exchanged on or before 6 March 2024 will continue to benefit from MDR, regardless of when they complete.
Under MDR, the rate of SDLT has been determined by the total consideration given by any purchaser buying two or more dwellings in a single transaction, or linked transactions, divided by the number of dwellings. This has allowed the purchaser to calculate the SDLT based on the average value of the dwellings purchased multiplied by the number of dwellings, as opposed to their aggregate value.
Its abolition follows large numbers of speculative claims, for example in relation to ‘granny flats’, but will result in significant increases in SDLT liability, particularly for purchasers of properties such as blocks of flats.
Mixed use properties
Despite many speculative claims being made by purchasers, the government has decided not to amend the SDLT legislation on purchases of mixed residential/commercial properties, which will continue to be liable to SDLT at commercial rates.
Registered Social Landlords
The definitions relating to relief from SDLT for Registered Social Landlords providing social housing will be amended with effect from 6 March 2024, to ensure that they apply to all qualifying purchases with public subsidy. In addition, public bodies will be exempted from the penal 15% rate.
First Time Buyers’ Relief
For purchases with an effective date (normally completion) on or after 6 March 2024 (subject to transitional rules), First Time Buyers’ Relief will be extended to individuals buying leasehold residential property by way of the grant of a new lease through a nominee or bare trustee. This is designed to assist purchasers needing to preserve anonymity for personal reasons.
The government has unveiled a range of policies to boost the economy and support key sectors, such as strategic manufacturing sectors, creative industries, green industries and digital technologies and AI. A total of over £5.5bn of funding over the next five years that will generate new opportunities and demand for professional services firms such as consultants, lawyers and property advisers.
The most significant tax announcement was the headline cut in NIC by 2% for employees and the self-employed. However, when the NIC cut is combined with fiscal drag, the effect of the personal allowance and the tax rate thresholds being frozen, the overall impact on the employees is lower, real terms net pay.
The government also announced an extension of the full expensing regime to leased asset, which will help businesses access tax relief sooner on their capital expenditure. This followed a recent clarification from HMRC that corporates operating through partnership structures could access the relief. Partnerships of only individuals, however, are still unable to obtain relief in a similar way.
Changes to the rules for non-UK domiciled individuals will affect some professional services firms' reward structures and may result in a few key individuals considering a change of residence.
A cut in capital gains tax from 28% to 24% for second homes was announced in the hope that it will encourage more transactions. It seems doubtful that this policy alone will stimulate the market, especially compared to the impact of falling inflation and mortgage rates.
The budget forecast that inflation will drop to a more manageable 2% sooner than anticipated will reduce the pressure on the cost of living and borrowing. This should have a positive impact on professional services firms, as mainly people businesses, with a high degree of sensitivity to people capital.
Overall the mix of increased investment and falling inflation will be welcome news for professional services firms. This will be offset by the ongoing impact of fiscal drag on salary costs, notwithstanding the headline cut in NICs.
If you would like to discuss the Budget announcement in more detail, please email Neil Williams and one of our Professional Services experts will get in touch shortly.
In disappointing news for UK oil & gas producers, the Government has extended the ‘temporary’ energy profits levy (EPL) for another year to 31 March 2029. UK oil & gas producers will continue to see a tax rate of 75% on ringfenced profits. This comes despite pressure and evidence that the high rate of tax is impacting investment in the UK continental shelf.
It has been confirmed that the Energy Security Investment Mechanism (ESIM) thresholds that ensure that the EPL is switched off if the 6 month average price for both oil and gas is at or below $71.4 per barrel for oil and 54 pence per therm for gas, will be adjusted on1 April 2024 and annually thereafter by the preceding December’s CPI figure.
For the renewable sector, the Government published the full parameters for the Contracts for Difference Allocation Round 6 (AR6), including setting the largest ever budget for a single round of over £1 billion.
Probably due to the relatively low electricity price there was no mention of the Energy Generators Levy which is due to end on 31 March 2028.
If you would like to discuss the Budget announcement in more detail, please email Viran De Silva and one of our Natural Resources and Renewable Energy experts will get in touch shortly
This was a disappointing budget for the Consumer Markets sector with little done to address the increased business cost pressures faced by the sector.
The well trailed National Insurance cuts and changes to Child Benefit arrangements will certainly benefit employees. However, it remains to be seen if these measures will offset the frozen income tax thresholds and put more money in consumers’ wallets.
The increase in the VAT registration threshold will help small businesses in the sector during their early stages of growth. The expected freezes to fuel and alcohol duty will also be welcomed.
There were no announcements on reversing the tourist tax, reducing VAT rates or reforming business rates. Much of the sector will feel that their vocal representations have gone unheard.
Perhaps a pre-election 'give-away' budget will follow in the Autumn when interest rates, inflation and energy prices have all come down?
If you would like to discuss the Budget announcement in more detail, please email Neil Stockham and one of our Consumer Markets experts will get in touch shortly.
The Chancellor announced a number of measures to support life sciences in specific geographic areas. For example, he announced funding for a new life sciences hub in Canary Wharf and measures to enhance Cambridge’s position as a science capital of Europe.
In addition, the Chancellor announced that Liverpool would become a new Investment Zone to help become a global leader in life sciences innovation. This will be supported by an Investment Opportunity Fund that provides flexible funding to respond to opportunities in priority sectors, explicitly including life sciences.
From a tax perspective, R&D tax credits are clearly important to life sciences businesses. There was nothing new in the Budget in this respect. This will, no doubt, be welcomed by businesses still getting to grips with the recent changes to the regime. On the other hand, it was announced that HMRC will establish an expert advisory panel to support the administration of R&D tax reliefs. This panel should provide industry expertise in key sectors such as life sciences, hopefully helping make the claims process as easy as possible for claimants.
If you would like to discuss the Budget announcement in more detail, please email Carole Le Page and one of our life sciences experts will get in touch shortly.
Amongst today’s headline NIC and non-dom announcements, the Chancellor set out some key measures impacting the Not-for-Profit sector within his Spring Budget:
Creative Tax Reliefs: From 1 April 2025, the rates of Theatre Tax Relief (TTR), Orchestra Tax Relief (OTR) and Museums and Galleries Exhibition Tax Relief (MGETR) will be permanently set at 40% (for non-touring) and 45% (for touring and all orchestra). This fixes these valuable reliefs at a level that was previously envisaged to be temporary, and will be welcomed by the sector as the tax credits prop up crucial creative industries. It also demonstrates the Government commitment to the sector, putting reliefs for live performances and in person events on a similar footing to audio-visual reliefs.
SDLT: Welcome changes have been made to reliefs for Social Housing to update out-of-date references and to extend definitions that were resulting in restriction of reliefs where Registered Providers expected to benefit. Additionally, an unanticipated 15% SDLT charge that applied to public body ownership of social housing has been removed. These changes will support the social housing sector, removing unintended barriers to social housebuilding.
Gift Aid: Existing legislation will be amended to ensure charities can continue to claim Gift Aid on subscriptions whilst complying with the protections to be introduced in the Digital Markets, Competition and Consumers Bill. There had been concerns that complying with the Bill would reduce valuable Gift Aid income to some charities, and this announcement will provide comfort to Charities about future income sources that they need to meet their vital good works.
If you would like to discuss the Budget announcement in more detail, please email John Angood and one of our Not-For-Profit experts will get in touch shortly.
There were some important announcements for investors in the residential and student accommodation sectors, in particular for individuals, in an otherwise quiet budget for Real Estate investors.
The announcement that multiple dwellings relief (“MDR”) for SDLT purposes will be abolished from 01 June 2024 is likely to influence taxpayer behaviours, increasing the attractiveness of corporate vs asset acquisitions, particularly for corporate and institutional investors. One important item of detail to note is that the abolition will include grandfathering rules as an anti-avoidance measure, preventing changes to existing contracts.
Individuals holding residential property are most affected by the announcements. The hope is that changes to CGT and Furnished Holiday Lettings regimes, along with the abolition of MDR, will lead to more home disposals by landlords, allowing for an increase in home ownership. In the case of abolishing FHL removing incentives to offer short term holiday lets rather longer-term homes, this may increase home rental supply.
If you would like to discuss the Budget announcement in more detail, please email Phil Smith and one of our Real Estate & Construction experts will get in touch shortly.
The Government had previously announced its intention to implement the OECD’s recommendations on the Crypto-Asset Reporting Framework by 2027. The government has now released a consultation on three areas.
Implementation
Focuses on definitions, what information should be reported, and the introduction of a penalty regime.
Amendments to Common Reporting Standard (CRS):
Exclusions for certain not-for-profits and an election to report under either the CARF or the CRS. There are some potentially unwelcomed policy initiatives around widening the scope of an Investment Entity to include investing in crypto-assets within the scope of CRS which is likely to bring crypto-asset funds into the regime.
Potential domestic reporting requirement
The BBSI returns will be replaced with a domestic scheme aligned with the information reported under CRS. While some financial institutions will have processes in place, for many fintech and crypto-exchanges this will represent a significant change in the level of reporting required and a potentially significant cost.
A consultation has been announced to establish a new PISCES platform, allowing private companies to access capital markets and sell existing securities from an earlier stage of their growth. The planned regulatory framework will allow existing shares to be sold monthly/quarterly for unlisted companies. This will be welcome for those in the fast-growing Fintech sector looking to raise funding.
The Government has announced a new ‘UK ISA’. This provides a tax-free savings vehicle that allows investors to invest in UK businesses. The government has launched a consultation to invite views on the design and implementation of the rules which will run until 6 June 2024.
The Government continues to announce reforms to pension fund rules to help boost investment in British businesses and consolidate the pensions market. This would include a potential requirement to publicly disclose levels of investment in UK businesses and prevent schemes performing poorly for savers to take on new business. The plans are subject to a consultation by the FCA.
Seeking to further promote the UK as a preferred investment holding jurisdiction, the Reserved Investor Fund (RIF), an unauthorised contractual scheme offering a low cost, flexible alternative to existing authorised contractual schemes will be introduced. Detailed rules will be set out in regulations in due course.
If you would like to discuss the Budget announcement in more detail, please email Michael Whiteside and one of our Financial Services experts will get in touch shortly.
The Budget continued the focus on rewarding workers carried over from the Autumn Statement. There was an additional focus on stimulating investment to achieve growth. Tax cuts were heavily trailed ahead of the Budget and while the Chancellor delivered a further 2% NI cut for employees and the self-employed, there was an emphasis from Jeremy Hunt on providing tax savings in a responsible manner.
The Chancellor sought to stimulate business investment by widening the scope of capital allowance full expenses to leased assets. The proposal will first go through consultation and will, therefore, take time to enact.
The VAT registration threshold will also be increased from 1 April 2024 to £90,000 and the deregistration threshold to £88,000. The Chancellor claims this will take tens of thousand of businesses out of VAT. This may leave them in a position where they can better self-fund their investments.
Under the creative industry tax credit schemes, reliefs will be improved for those working in the visual effects sector. The higher rates of tax reliefs for theatres, orchestras, museums and galleries permanent established to support such businesses following the pandemic will be made permanent.
The government announced its intent to reform the administrative burden for planning and the electricity grid. The Budget sees the publication of a consultation for planning reform and a number of announcements with regards administration and accelerating the connection of new green generators to the grid.
The Budget announced additional public funding being made available for science and innovation, seen as key to future economic growth. Funds will be available for specific sectors such as advanced manufacturing, green industries, digital technology & AI and life sciences. Spending on transportation will continue with the green light being given to a number of infrastructure projects. Agriculture will also benefit from “the largest-ever round of grants on offer.” Entrepreneurs working in these sectors should find such additional government funding welcome.
Mixed Public/Private sector funding
The Chancellor has announced further initiatives to create government-backed funds to attract private investment in business, particularly from pension schemes.
Further work will be required on the development of such funds. An exercise will be carried out to identify how defined benefit pension schemes choose to invest their monies, and to build a complimentary investment product that provides the necessary safeguards that pensions require.
The government has now been confirmed that the ‘sunset date’ for Freeports will be extended to 30 September 2031 for English freeports and 30 September 2034 for those in Scotland and Wales.
The Budget announced further public funding for housing projects, both in London and across the UK.
Small and medium sizes enterprises (SMEs)
The Budget provides support for SMEs by extending the Recovery Loan Scheme, which will be renamed the “Growth Guarantee Scheme.” The scheme seeks to give SMEs access to finance to assist with their growth and investment, with Government guaranteeing 70% of the debt.
Measures are also being put in place to reinstate the criteria of ‘high net worth or sophisticated investor’. This lowers the regulatory requirements for businesses to produce prospectus when seeking investment from such an individual. Additionally, the government is reviewing feedback from a pilot with the aim of introducing a scheme that will ensure all businesses has access to appropriate energy advice.
A number of measures were announced by the Chancellor which should result in an increase in the number of people able and willing to work.
National Insurance
The announcement that grabbed the headlines again was the further 2% cut to Class 1 NIC for employees, from 10% down to 8% on employment income between £12,584 and £50,284 per annum. This equates to a saving of £63 per month to an employee earning at the top of the band or more, from 1 April 2024.
Employers will welcome this as their employees are receiving an increase in net pay that they do not need to be fund. The Chancellor predicted that this could lead to an extra 100,000 individuals joining the workforce.
However, the freeze in income tax and NIC thresholds continues to gradually push taxpayers into higher tax brackets as their wages increase with inflation. This ‘fiscal drag’ is feeding through to impact businesses – either through higher wage demands or because of the significant disincentive it creates for individuals at key thresholds such as £50,000 and £100,000.
Child benefit clawback
Similarly, the increase to the thresholds above which Child Benefit is clawed back will provide a boost to some workers with families, and again it is estimated that the overall benefit to the British business will be an equivalent of 10,000 additional workers being available.
The childcare industry was unable to support the additional demand generated by measures announced in 2023. The Chancellor announced measures to support the childcare industry in meeting that demand. There may be a period of catch up, but ultimately the provision of childcare for must be a significant benefit to business and will again result in an expansion of the available workforce.
Non-domiciles (non doms)
Another of the headline news items from the Budget is the abolition of the remittance basis for non-doms. A replacement scheme will be introduced that will allow individuals coming to the UK to only be taxed on their UK income during their first four years of residence. The UK should remain a competitive place to work for globally mobile individuals who are unlikely to remain long-term. Consequently, the abolition should not hinder the hiring of mobile workers from abroad.
For completeness we note that the Chancellor made the following announcements with respects property, which may affect entrepreneurs’ investments outside their own business. These are a) the abolition of the furnished holiday let regime from 6 April 2025, b) the abolition of the SDLT multiple dwellings relief from 1 June 2024 and c) a reduction in the rate of CGT on residential property gains from 28% to 24%.
If you would like to discuss the Budget announcement in more detail, please email Chris Holmes or Paul Townson and one of our Real Estate & Construction experts will get in touch shortly.
Health and social care businesses may be forgiven for feeling a little underwhelmed and unsupported by the Spring Budget.
Care sector workers will benefit from the reduction in NI and potentially from the child benefit reforms.
The previously announced increase to national minimum wage will also no doubt be welcomed by carers when it hits pay packets from 1 April. However, these changes come at the cost of increasing pressure on the budgets of health and social care businesses.
The chancellor confirmed an additional £500m investment into free childcare over the next 2 years with the intention of encouraging childcare providers to expand their provision. Whether this encourages would-be carers to return to work remains to be seen.
Looking more widely at the announcements;
If you would like to discuss today’s announcement in more detail, please email Vicky Robertson and one of our Health and Social Care experts will get in touch shortly.
Coming into the Budget, there were three macro factors impacting the local government sector: increased demand, increased costs and increased financial pressures.
Let’s look at this with one the largest areas of spend for the sector – Adult Social Care:
In this context, the sector is understandably concerned as it is widely recognised that local government is under significant financial pressure.
The measures announced in the Spring Statement include:
Sector wide
Devolution and regeneration
Other specific measures
The measures announced go some way to addressing challenges on housing support, further devolution and improving the planning process. However, the announcements did not specifically address financial sustainability. Annual financial settlements are still the current arrangement now for a sixth year in a row. When looking at the original example around Adult Social Care, it is felt by many, that the announcements in the Spring Budget did not address the macro factors.
The Budget may leave some in the sector with the same concerns of how to balance budgets without impacting service delivery. We have seen significant budget cuts approved by local authorities to manage their financial position. It will be interesting to see how the balance between a drive for a more productive sector alongside pressures on finances plays out in the coming months in what will be a critical year with an impending General Election.
If you would like to discuss the Budget announcements in more detail, please email Gurpreet Dulay.
Ben Handley
Caroline Harwood
Liam O'Doherty
Martyne Pearson
Paul Falvey
Dawn Register
Jon Hickman