Budget Highlights – Spring Budget 2024

Spring Budget

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High Income Child Benefit Charge

The High Income Child Benefit Charge (HICBC) is a tax charge that applies to higher earners who receive Child Benefit, or whose partner receives it.

The government is increasing the income threshold at which HICBC starts to be charged from £50,000 to £60,000 from April 2024.

The rate at which HICBC is charged will be halved from 1% of the Child Benefit payment for every additional £100 above the threshold to 1% for every £200. This means that Child Benefit will not be withdrawn in full until individuals have ‘adjusted net income’ of £80,000 or more.

National Insurance contributions

The Chancellor has previously announced major changes to the National Insurance contributions (NICs) system.

Employees and NICs

Following the Autumn Statement in 2023 the government cut the main rate of Class 1 employee NICs from 12% to 10% from 6 January 2024. The government has further cut the main rate of Class 1 employee NICs from 10% to 8% from 6 April 2024.

The self-employed and NICs

The self-employed generally have to pay two forms of NICs: Class 2 and Class 4.

Firstly, the government will amend Class 2 self-employed NICs from 6 April 2024. This means that, from 6 April 2024:

  • Self-employed people with profits above £6,725 will continue to get access to contributory benefits, including the State Pension, through a National Insurance credit, without paying NICs.
  • Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension will continue to be able to do so.

Secondly, the government will cut the main rate of Class 4 self-employed NICs from 9% to 6% from 6 April 2024.

The VAT registration threshold

After many years of having been frozen, the government will increase the VAT registration threshold from £85,000 to £90,000 and the deregistration threshold from £83,000 to £88,000 from 1 April 2024. The government has stated that these new thresholds will be frozen but has not stated for how long.

Making Tax Digital for income tax

The government has announced the outcome of the review into the impact of Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) on small businesses and intends to proceed with implementation from April 2026. The government will also ensure taxpayers who join MTD from 6 April 2024 are subject to the government’s new penalty regime for the late filing of tax returns and late payment of tax.

Individual Savings Accounts

The government is freezing the limits on Individual Savings Accounts (ISAs) (£20,000), Junior Individual Savings Accounts (£9,000), Lifetime Individual Savings Accounts (£4,000 excluding government bonus) and Child Trust Funds (£9,000) for 2024/25.

The government announced that it is looking to introduce the UK ISA. This will have a new ISA allowance of £5,000 in addition to the existing ISA allowance, and will provide a new tax-free savings opportunity for people to invest in the UK.

National Living Wage and National Minimum Wage

Increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from 1 April 2024. In addition, from 1 April 2024 the NLW will be extended to 21 and 22 year olds. The rates which will apply from 1 April 2024 are as follows:

 

NLW

18-20

16-17

Apprentices

From 1 April 2024

£11.44

£8.60

£6.40

£6.40

Furnished Holiday Lettings

The Furnished Holiday Lettings (FHL) tax regime will be abolished from April 2025. The effect of abolishing the rules will be that short-term furnished holiday lets and longer-term residential lets are treated the same for tax purposes and individuals will no longer need to report the two income streams separately.

Business Rates

The small business multiplier will be frozen for another year, while the 75% Retail, Hospitality and Leisure relief will be extended for 2024/25. The standard multiplier will be uprated in line with the Consumer Prices Index for September 2023. These changes will take effect from 1 April 2024 in England.

Other

Other announced changes include:

  • Making the cash basis of accounting the default position for the self-employed from 2024/25, with an alternative to opt for the accruals basis, together with technical changes to the regime.

Inheritance Tax nil rate bands

Despite much speculation before the Budget, Inheritance Tax (IHT) has not been abolished. The nil rate band has been frozen at £325,000 since 2009 and this will now continue up to 5 April 2028.

Simplification measures

The government has announced a package of measures that supports its ambition to simplify and modernise the tax system, which includes the following:

  • To simplify the process for employees claiming tax relief on their expenses, and for HMRC to automatically process claims, the government is designing a new, online service for employees to claim tax relief on all of their expenses in one place.
  • The government will mandate the reporting and paying of income tax and Class 1A NICs on benefits in kind via payroll software from April 2026.
  • The government will legislate to introduce a route for people to apply for National Insurance Credits for parents and carers for tax years where they have not claimed Child Benefit, to ensure that people do not miss out on their State Pension entitlement.