Yesterday saw Jeremy Hunt deliver what is expected to be his pre-general election budget with the main focus remaining on tackling inflation, boosting economic growth and rewarding hard work.
There were several headline grabbing announcements mainly aimed at workers and property owners, keep reading for the main announcements with more detail to follow
High Income Child Benefit Charge
The current thresholds are being increased with effect from 6 April 2024. The income threshold when the Child benefit clawback starts has been increased from £50,000 to £60,000 and the Income level when all Child Benefit is clawed back has been increased from £60,000 to £80,000
To reduce unfairness in the current arrangements the government wants to move to a household based income threshold rather than basing the charge on the higher earner’s income as we do now. There are no details on how this will work or what the household income threshold will be at the moment. This is planned to start in April 2026 so we will keep you updated as and when more detail becomes available.
National Insurance Contributions (NIC’s)
Employed
The main rate of employee’s NIC is reduced from 10% to 8% from 6 April 2024.
This is in addition to the reduction from 12% to 10% which came into effect on 6 January 2024. So overall a reduction of 4%.
The additional rate of NIC for earnings over £50,270 remains at 2%
Employers
The rate of employer’s NIC is not changing and remains at 13.8%, the employment allowance also remains unchanged at £5,000
Self employed
Self-employed individuals with profits of more than £12,570 a year pay two types of NIC: Class 2 and Class 4.
The main rate of Class 4 NIC was cut from 8% to 6% in the budget yesterday starting from 6 April 2024, this is in addition to the 1% cut announced in the Autumn statement 2023 so an overall reduction from 9% to 6%
It was also announced in the Autumn statement 2023 that Class 2 NICs will effectively be abolished, saving £179.40 per annum. If your profits exceed £6,725 in 2024/25 you will continue to accrue entitlement to state benefits despite not paying Class 2 NICs. If your profits are less than £6,725, or you make a loss, you may need to pay Class 2 NICs on a voluntary basis to maintain your state benefit entitlement
Capital Gains Tax (CGT)
Since 2016 we have had increased Capital Gains Tax rates when a residential property is sold (that is not your main residence) From 6 April 2024, the residential property Capital Gains rate will fall from 28% to 24% for individuals with residential property gains falling outside of their basic rate band. The rate of Capital Gains Tax for for basic rate taxpayers remains at 18%
As announced previously the CGT annual exemption will drop to £3,000 from 6 April 2024, down from £6,000 in 2023/24.
Furnished Holiday Lets
Qualifying furnished holiday lets (FHL) have enhanced tax reliefs available to them.
It was announced in the Budget that, from 6 April 2025, the concept of FHLs and their beneficial tax treatment will be abolished and going forwards they will be taxed in the same way as any other rental property profits. For FHL owners this will mean the loss of the full mortgage interest relief deduction and the ability to claim the 10% tax rate on a future sale, plus changes to the way tax relief is claimed on furniture and other items.
This change is not due to happen until 6 April 2025, but note that there will be measures in place from Budget Day (6 March 2024) to prevent tax planning steps that artificially accelerate the disposal date of an FHL to a date before 6 April 2025.
Please get in touch for a more detailed analysis of how the withdrawal of the FHL status will affect you.
Vat Registration Threshold
From 1 April 2024, the VAT registration threshold will increase by £5,000 to £90,000
The deregistration threshold will also increase by £5,000 to £88,000.
There have been no changes to the rates of VAT and the standard rate continues to be set at 20%.
