What you need to know

Tom Biggs ACA CTA, summarises the main announcements from Jeremy Hunt’s latest Budget statement. 

It was speculated in the lead up that the Spring Budget 2024 would be focussed on tax cuts given there is a general election looming! 

On the surface the Chancellor, Jeremy Hunt, has been able to claim that since 2020 the government has reduced taxes by a total of £29bn. However, there may be an element of smoke and mirrors to such a proclamation given that it only reflects some of the overall picture.

A closer analysis of the total tax burden reveals that in the same timeframe there have been tax rises, mostly through frozen tax bands and cuts to allowances, totalling £62bn. Rescuing the banking sector in 2008 cost £137bn, and then there was government expenditure of circa £370bn to support the economy during the pandemic. 

This has combined to place a huge debt pile on the state and meant taxes had to rise to reassure markets that the UK could afford the borrowing it needed to meet its spending pledges. Rising inflation and corresponding interest rate increases simply put this position in sharper focus resulting in the tax burden rising to a near record 37% of GDP.

The consequence is that implementing tax cuts, such as Hunt’s aim to eventually abolish National Insurance, without significant reductions to public spending, will be very difficult moving forward. Given how little fiscal room for manoeuvre the Chancellor has, the future performance of the UK economy could render this tax cutting agenda an impossibility.  

The key announcements from the budget were as follows:

Hunt is allocating £200m to extend the Recovery Loan Scheme which is to be rebranded as the Growth Guarantee Scheme. This is designed to help 11,000 small businesses in gaining access to much needed finance.

National Insurance Contributions (NICs) is set to be cut again from 6 April 2024, with Class 1 Primary NICs for employees reducing from 10% to 8%. For the self-employed, Class 4 NICs will decrease from 8% to 6%. These announcements mean the average employee could be £450 better off every year, while it may save the average self-employed person £350 per annum.

The Chancellor is set to reform the High Income Child Benefit Charge (HICBC). Prior to the budget it had been labelled as confusing and unfair. Currently, if you earn £50,000 or more then a charge is applied that reduces the amount of child benefit you receive. The payment is removed entirely if you earn more than £60,000.

Where this can be seen as unfair is if a couple earning £50,000 each, or £100,000 of combined income, they can still obtain the full amount of child benefit. However, an individual, such as a single parent, earning £60,000 doesn’t receive it.

A new system is being consulted on what will base any charge on a household’s income,  not the higher-earning parent’s income. This means likely, significant reform to the tax system so it won’t be introduced until April 2026.

Prior to then, from 6 April 2024, the threshold at which you start paying the HICBC will increase by £10,000 to £60,000. So, if as a parent you earn less than £60,000 you can keep all of your child benefit payments. Also the amount at which child benefit is withdrawn will rise by £20,000 meaning once you earn £80,000 or more you won’t be able to keep any child benefit.

Higher rate Capital Gains Tax (CGT) on the disposal of residential property will be reduced from 28% to 24% as of 6 April 2024. The hope is this will boost tax revenues to the government by encouraging more property transactions to take place.

CGT on property is paid on residential property disposals where no private residence relief is available such as second homes, buy-to-lets, and holiday lets. The rates are based on your income tax bracket, and the basic rate will remain at 18%. It should be noted however, that the CGT annual allowance (the gains you can make before CGT applies) is still set to reduce from £6,000 to £3,000 as of 6 April 2024. 

Also of note, stamp duty relief is being scrapped on multiple dwelling purchases.

The furnished holiday lets (FHL) regime is to be abolished on 6 April 2025. FHL has offered tax advantages to those letting out property as a holiday home. Landlords of FHL have been able to deduct the full cost of their mortgage interest payments from their rental income. They have also been able to reduce potentially their CGT charge when they sell.

There are about 127,000 properties in the UK registered through FHL. The government’s reasons for doing are because holiday lets are seen as reducing the availability of stock in the market for long-term rentals to residents. Removal of the relief and a lower potential CGT rate if these landlords sell, may see more of these properties come onto the market.  

The content of this post was created on 06/03/2024 and updated on 07/03/2024.

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