We all knew that the Chancellor would have restricted options when considering the contents of his recent spring budget announcement on 6 March. But it seems he has the skills after all to “play tennis” with his arms tied behind his back…

Would there be a combination of tax cuts and public expenditure cuts, or would he go for broke and flex his fiscal rules to place the UK economy in a more expansive position?

Rather than relisting what he actually offered we have summarised below a few of the areas that will have the most impact on small businesses and individuals in the coming 2024-25 tax year.

Key dates

The VAT registration threshold is to increase to £90,000 from 1 April 2024, while the National Insurance reduction and increase in HICBC threshold take effect from 6 April 2024. The cut in the top rate of residential capital gains tax applies from the same date. The abolition of the Furnished Holiday Lettings (FHL) regime and the replacement of the remittance basis rules take effect from April 2025.

This note highlights some of the key changes.

Further National Insurance cuts

Following on from the National Insurance cuts announced at the time of the 2023 Autumn Statement, the Chancellor announced that the main primary Class 1 rate would fall to 8% from 6 April 2024. The rate was previously cut from 12% to 10% with effect from 6 January 2024. The further 2% cut will reduce the amount of Class 1 National Insurance payable by employees in 2024/25 by £754.

The self-employed are also to benefit from National Insurance cuts. At the time of the Autumn 2023 Statement, the Chancellor announced that the main Class 4 rate was to be cut from 9% to 8% from 6 April 2024. However, this is to be cut by a further 2% to 6% from 6 April 2024. This too will be worth up to £754 in 2024/25.

At the time of the 2023 Autumn Statement, the Chancellor announced that Class 2 National Insurance contributions are to be abolished from 6 April 2024. The Government are to consult later in the year on how this will be delivered.

Abolition of the FHL regime

Furnished holiday letting (FHLs) enjoy tax advantages which are not available to landlords letting residential property on long-term lets. These include the ability to deduct interest and finance costs in full when calculating the taxable profit and access to capital gains tax rollover relief and business asset disposal relief.

To address concerns as to the lack of residential property in tourist hot spots, the FHL regime is to be abolished from 6 April 2025. Draft legislation will be published for consultation. This will include anti-forestalling measures to prevent the use of unconditional contracts to secure capital gains tax relief under the existing FHL rules. The anti-forestalling measures will apply from 6 March 2024.

Reduction in top rate of capital gains tax on residential gains

Currently, chargeable gains on residential property are charged at a rate of 28% where income and gains exceed the basic rate band (set at £37,700). This is to fall to 24% from 6 April 2024. The lower residential rate will remain at 18% where chargeable gains on residential property fall within the basic rate band.

Where the conditions for business asset disposal relief were met, gains on the disposal of a FHL which were not rolled over were taxed at 10%.

Increase in the VAT registration threshold

The VAT registration threshold is to rise from £85,000 to £90,000 with effect from 1 April 2024. The VAT de-registration threshold will rise from £83,000 to £88,000 from the same date.

High Income Child Benefit Charge

The High Income Child Benefit Charge (HICBC) claws back child income where the claimant or their partner have adjusted net income of £50,000 or more. The charge is equal to 1% of the child benefit for the tax year for every £100 by which adjusted net income exceeds £50,000. Once income reaches £60,000, the charge is equal to the full amount of the child benefit for the year.

The thresholds are increased and the claw back rates are reduced from 6 April 2024.

For the 2024/25 tax year, the abatement threshold is increased from £50,000 to £60,000. Once adjusted net income exceeds £60,000, the HICBC is equal to 1% of child benefit paid for every £200 by which adjusted net income exceeds £60,000. Once adjusted net income reaches £80,000, the charge will be equal to the child benefit for the 2024/25 tax year.

The HICBC is a complicated charge with a number of anomalies. Currently, a couple where both partners have adjusted net income of £49,999 (total combined income of £99,998) are able to keep their child benefit in full, whereas a couple where one partner has no income and the other has income of £60,000 will effectively lose all their child benefit in the form of the HICBC. To address this, the HICBC will be based on household income from April 2026.

Abolition non-UK domicile tax regime

The remittance basis tax regime for non-UK domiciled individuals who are resident in the UK allows them to be taxed only on foreign source income and gains if they are remitted to the UK in return for paying a remittance basis charge. The charge depends on how many years they have been resident in the UK for tax purposes. Once a person has been resident for 15 of the previous 20 tax years, they are deemed to be UK-domiciled and taxed in the UK on all their worldwide income.

The remittance basis rules are to be abolished from April 2025 and replaced by a simpler residence-based regime. Individuals who opt into that regime will not pay any tax on foreign income for the first four years in which they are resident in the UK as long as they have not been resident for the last ten tax years. Transitional arrangements will apply.

Overseas Workday Relief (OWR) is also to be reformed and eligible employees will be able to claim it for the first three years of tax residency.

The Government are also to consult on moving to a residence-based regime for inheritance tax.

British ISA

The Government are to introduce a British ISA with a separate £5,000 limit in addition to the usual ISA limit of £20,000. They will consult on the details at a later date.

Duties

Fuel duty rates will remain frozen for a further 12 months until March 2025, while alcohol duty rates will remain frozen until 1 February 2025.

A new duty on vaping products is to be introduced and will apply from 1 October 2026. Rises in tobacco duty will take effect from the same date. 

Air passenger duty for flights other than economy flights is to increase from 1 April 2025.

Please call if you need help with any of the issues raised in this alert.

1 March 2024 – Due date for Corporation Tax due for the year ended 31 May 2023.

2 March 2024 – Self-Assessment tax for 2022-23 paid after this date will incur a 5% surcharge unless liabilities are cleared by 1 April 2024, or an agreement has been reached with HMRC under their time to pay facility by the same date.

19 March 2024 – PAYE and NIC deductions due for month ended 5 March 2024 (If you pay your tax electronically the due date is 22 March 2024).

19 March 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2024.

19 March 2024 – CIS tax deducted for the month ended 5 March 2024 is payable by today.

1 April 2024 – Due date for corporation tax due for the year ended 30 June 2023.

19 April 2024 – PAYE and NIC deductions due for month ended 5 April 2024. (If you pay your tax electronically the due date is 22 April 2024).

19 April 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 April 2024.

19 April 2024 – CIS tax deducted for the month ended 5 April 2024 is payable by today.

30 April 2024 – 2022-23 tax returns filed after this date will be subject to an additional £10 per day late filing penalty for a maximum of 90 days.

The coding out threshold may entitle you to have tax underpayments collected via your tax code when you are in employment or in receipt of a company pension. Instead of paying off debts in a lump sum, money is collected in equal monthly instalments over the tax year.

If you want to benefit from this opportunity to pay tax due on 31 January through your tax code, then you need to file early. The deadline for the 2022-23 tax year has already passed.

You can pay your self-assessment bill through your PAYE tax code as long as all these apply:

• you owe less than £3,000 on your tax bill (you cannot make a part payment to meet this threshold);
• you already pay tax through PAYE, for example you’re an employee or you get a company pension; and
• you submitted your paper tax return by 31 October or your online tax return online by 30 December.

HMRC will automatically collect what you owe through your tax code if you meet these three conditions unless you have specifically asked them not to (on your tax return). There are circumstances when HMRC will not collect the monies through your tax code, for example, if you do not have enough PAYE income to cover he debt.

If you would like to consider paying your self-assessment bill in this way for the 2023-24 tax year, you have until 30 December 2024 to file your online self-assessment returns to have the monies collected in the 2025-26 tax year starting on 6 April 2025. If you qualify to have your tax debt coded out then this is a good reason to deal with your tax return obligations as soon as you can, after the end of the relevant tax year.

There are rules that businesses must follow when they are reporting employee changes. These changes must be sent to HMRC using a Full Payment Submission (FPS). The FPS is a submission that is required every time you pay your employees and must be submitted on or before the usual date you pay your employees. The information provided on an FPS helps HMRC ensure that they have the up-to-date information on your employees.

Additional information is required on your FPS if:

• it includes a new employee
• an employee leaves
• you start paying someone a workplace pension
• it’s the last report of the tax year
• an employee changes their address

You may also need to tell HMRC if an employee:

• becomes a director
• reaches State Pension age
• goes to work abroad
• goes on jury service
• dies
• joins or leaves a contracted-out company pension
• turns 16
• is called up as a reservist
• changes gender

The VAT Flat Rate scheme is open to VAT registered businesses that expect their taxable turnover in the next 12 months to be no more than £150,000, excluding VAT. The annual taxable turnover limit is the total of everything that a business sells during the year that is not VAT exempt.

Under the scheme rules, businesses pay VAT as a fixed percentage of their VAT inclusive turnover. The actual percentage used depends on the type of business. There is a special 1% discount for businesses in their first year of VAT registration.

If any of the following apply, you will not be eligible to join the scheme:

• you left the scheme in the last 12 months;
• you committed a VAT offence in the last 12 months, for example VAT evasion;
• you joined (or were eligible to join) a VAT group in the last 24 months;
• you registered for VAT as a business division in the last 24 months;
• your business is closely associated with another business;
• you’ve joined a margin or capital goods VAT scheme; or
• you are using the Cash Accounting Scheme.

Once you join the scheme you can usually continue using it provided your total business income does not exceed, or you do not expect it to exceed, £230,000 (including VAT) in a 12-month period. You must also leave the scheme if you expect your total income in the next 30 days alone to be more than £230,000 (including VAT). There are special rules if the increased turnover is temporary.

If you think that the scheme may be beneficial for your business, please get in touch and we can help you consider your options.