Spring Budget 2024 - Key Updates
The Spring Budget 2024 unveiled several significant adjustments to National Insurance Contributions (NICs) rates, as well as reforms in other tax-related areas. Here's a breakdown of the key announcements:
Personal Tax
National Insurance Contributions (NICs):
From April 6, 2024, the primary rate of Class 1 employee NICs will undergo a reduction of 2 percentage points, dropping from 10% to 8%.
The main rate of Class 4 NICs, typically paid by self-employed individuals, will see a decrease of 3 percentage points, from 9% to 6% starting April 6, 2024. This adjustment replaces the previously announced reduction to 8% in the Autumn Statement 2023.
A consultation is set to be launched later in the year to fulfill the government's commitment to eliminate Class 2 National Insurance. This initiative aligns with the announcement made during the Autumn Statement 2023 that, from April 2024 onward, no self-employed individual will be mandated to pay Class 2 NICs, although voluntary payments will still be permitted to accrue entitlement to contributory benefits.
High Income Child Benefit Charge:
Effective April 6, 2024, the threshold for the High Income Child Benefit Charge will be raised from £50,000 to £60,000, with the charge being tapered for those with incomes falling between £60,000 and £80,000. Furthermore, a consultation will be initiated regarding the transition to a household-based system rather than one dependent on individual incomes, anticipated to come into effect from April 2026.
Non-Domiciled Individuals:
The government intends to abolish the existing tax regime for non-UK domiciled individuals and introduce a residence-based regime starting April 6, 2025. Under this new system, individuals who have been tax residents in the UK for over four years will be liable for UK tax on their foreign income and gains, irrespective of domicile status. Transitional arrangements will be provided for existing non-doms claiming the remittance basis.
Capital Gains Tax:
Commencing April 6, 2024, the higher rate of Capital Gains Tax on residential properties will decrease from 28% to 24%.
Business tax
Capital Allowances:
During the Autumn Statement 2023, the government enacted a permanent provision for full expensing, enabling businesses to deduct the entire cost of qualifying plant and machinery investments from their taxable profits.
In the latest announcement, this has been extended to assets utilised for leasing, subject to certain fiscal conditions.
Creative Industries:
The government has unveiled over £1 billion in new tax reliefs to support the UK's creative sectors. This includes a 40% business rate relief for eligible film studios in England over the next decade, the introduction of a UK Independent Film Tax Credit, and a 5% increase in the tax credit rate for visual effects costs under the Audio-Visual Expenditure Credit, along with the removal of the 80% cap. Furthermore, tax relief for theaters, orchestras, museums, and galleries will be extended permanently.
VAT
VAT Registration Threshold:
Effective April 1, 2024, the government will raise the VAT registration threshold to £90,000 and the VAT deregistration threshold to £88,000.
These adjustments signify significant changes in taxation policies and are expected to have widespread implications for individuals and businesses alike. Further consultations and reforms in various areas are anticipated to be implemented in the coming years to streamline tax processes and ensure fiscal sustainability.
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