2024 Spring Budget: What this means for you
There was a lack of announcements targeted to help small businesses in the Spring Budget, but there were a few headlines that we wanted to highlight:
- National Insurance rate cut for employees from 10% to 8% (from April 2024)
- Self-employed National Insurance rate cut from 8% to 6% (from April 2024)
- Confirmation of future changes to the Child Benefit system (from April 2026), immediate changes to the thresholds from April 2024
- Capital Gains Tax rates cut on higher rate residential property sales from 28% to 24% (from April 2024)
- Changes to the taxation of Furnished Holiday Lets from April 2025
The Wow View
We were expecting news of tax cuts and that’s just what the government have announced, but it is unknown if these will translate into day-to-day increases in take-home pay, as the tax thresholds remain frozen. But there are some positives here, like making the child benefit system fairer, and there are some specific tax cuts that will fail to reach some people such as the reduction in Capital Gains Tax (CGT) on residential property - great news if you have a second house to sell but unlikely to benefit the majority of people.
The specific support for businesses that we hoped we’d see from this budget has sadly not emerged, the chancellor believes that tax cuts equal higher growth, but it is unknown if this will translate to helping businesses.
Below are some further insight into each of these key announcements:
National Insurance rate cuts
Employees - The Autumn Statement 2023 saw National Insurance (NI) rates cut from 12% to 10% for employees paying Class 1 National Insurance Contributions (NIC), this cut came into effect in January 2024. The government has announced a further change in the NI rate from 10% to 8% for those paying the lower rate of NI, with income between £12,570 and £50,270. Income above £50,270 will remain to be subject to Class 1 NIC at 2%. This further cut is predicted to save the average employee earning £35,000 a year around £450 annually. Directors who pay themselves via dividends with a salary under £12,570 will not be affected by this change but it will help their employees.
Self-employed - From 6 April 2024 there was due to be a change to Class 4 NIC rates, these are the NIC rates that you would pay as a self-employed individual, note this is not payable if you operate a Limited company. The anticipated change was to reduce the rate from 9% to 8%, today a further cut has been announced, to come into play on 6 April 2024, to reduce this rate to 6%, this is projected to save the average self-employed person £350 in NIC annually.
Whilst both employees and those who are self-employed are looking at an NI cut following today’s announcements, with no change in thresholds many will be looking at a relative decrease in income due to rising inflation and the cost of living. This, coupled with possible pay rises could see people paying more due to the frozen tax and NI thresholds.
Changes to the Child Benefit system
From April there will be changes to the Child Benefit system. Currently, Child Benefit gets clawed back by HMRC when the highest earner in the household exceeds £50,000 income for the tax year, this is fully paid back once you hit £60,000 of income. The charge is known as the High Income Child Benefit Tax Charge and is paid by an individual via their Self Assessment tax return.
This has been a topic recently highlighted by consumer watchdogs as unfair. Under this system you can have two individuals in the same household earning £49,999 each, totalling £99,998 without any Child Benefit being repaid but a single member of the household could wipe out the Child Benefit by reaching just £60,000 of income.
The new system will raise the threshold for the High Income Child Benefit Tax Charge to £60,000 for the highest earner in the household, and the full clawback will not be reached until the highest earner reaches £80,000.
The chancellor suggested from April 2026 that the system will be based on total household income, making it fairer for single parent households.
Child Benefit is available for children up to the age of 16, (or 20 if in full time education/training). Currently this is paid in 13 x four weekly payments at £24 per week for your first child and £15.90 per week for additional children. The claim can be backdated for only three months so we recommend looking at this as soon as possible.
Abolition of Furnished Holiday Lets
From 6th April 2025 the Furnished Holiday Lets (FHLs) tax regime is to be abolished making those owning holiday let businesses effectively taxed the same as long term rental businesses.
Currently, the properties that qualify, and are declared as FHLs, are deemed to be businesses and have advantageous treatment of expenses, such as mortgage interest, which do not apply to regular income from investment property. The sale of a FHL would potentially qualify for the Business Asset Disposal Relief tax rate of 10%, compared to residential property capital gain rates of 18 - 28% (about to be revised to 24% - see below).
We are awaiting further information to be published regarding the transition from the Furnished Holiday Let treatment to standard rental income, especially considering the treatment of losses brought forward and the potential to ring-fence the capital gain treatment of the period the property qualified as an FHL.
If you would like help in managing the tax treatment of your furnished holiday lets, please get in touch.
Capital Gains Tax cut on residential property disposals
As it stands, the rate of Capital Gains Tax applied to residential property disposals (where the property is not a person’s primary residence) is 18% and 28% (over the basic rate threshold). The Government has announced that from 6th April 2024 this higher rate will be reduced to 24%.
Private Residence Relief is applicable to an individual's private residence and so this change will only affect those with rental properties or second properties. This will be encouraging for those clients looking to dispose of their rental properties in the coming year as the total Capital Gains tax liability from the disposal will reduce.
Should you decide to sell a residential property please be aware that this is to be reported to HMRC within 60 days, at which time the capital gains tax is also due. This is something that The Wow Company can take care of for you and mitigate as much tax as possible using the available reliefs and expenses, do let us know if you are making plans to dispose of your property.
New R&D Merged Scheme
The previous R&D scheme, which was announced back in the Autumn 2023 budget is confirmed to go ahead. The existing Research and Development Expenditure (RDEC) and SME schemes will be merged, with expenditures incurred in accounting periods beginning on or after 1 April 2024 to be claimed under the merged scheme.
You can read more on these changes in our latest blog. If we already advise you on your R&D claims, we will be in touch soon with further information and advice. If you think you have an R&D claim and would like any advice, please book a call here.
General announcements
The full Spring Budget 2024 is published here on the government website and details all the changes listed above and many more.
- A new British ISA allows for an additional £5,000 of tax-free investment on top of usual ISA allowances
- An increase in the VAT threshold from £85,000 to £90,000
- A name change for the existing Recovery Loan Scheme to the Growth Guarantee Scheme and confirmation of an extension until March 2026
- The abolition of ‘non-dom’ status for those who are UK residents but UK non-domicile.
Further advice
Our remuneration planning service can help you be as tax-efficient as possible, so if you'd like to speak with a member of the tax team following today’s announcements, please contact tax@thewowcompany.com.
At Wow we want to see you and your business thrive whatever the budget announces. If you’d like to chat with us about any of the changes discussed in this article or your specific circumstances please get in touch, we’d love to help.
The information included in this article does not constitute advice.
