Tax

On 6 March 2024, Chancellor Jeremy Hunt delivered his Spring Budget. In the days preceding the Budget there had been mounting speculation that the Chancellor would cut personal taxes by reducing rates of income tax or National Insurance contributions (NICs). In the event, Chancellor Hunt did not disappoint and announced a further reduction in NICs, to take effect from 6 April 2024. There had also been speculation that the Chancellor would lift one of Labour’s cornerstone tax policies – the abolition of non-dom status for certain foreign nationals – and the Chancellor has today confirmed those suspicions by announcing the replacement of the existing “non-dom” regime with a residence-based framework.

Below is a summary of the key measures relevant to our clients. Please contact a member of the Weil London Tax team if you would like to discuss anything in further detail.

Business tax

VAT registration and de-registration thresholds: The VAT registration threshold will increase from £85,000 to £90,000. The VAT de-registration threshold will also increase from £83,000 to £88,000. These changes will take effect from 1 April 2024.

Economic Crime Levy: From 1 April 2024, the charge for very large regulated businesses (with UK annual revenue greater than £1 billion) will rise from £250,000 to £500,000 per year. There will be no change to the charge for other entities.

Full expensing: A technical consultation on “full expensing” (i.e. 100% relief) for expenditure on leased assets will be published (full expensing was introduced for plant and machinery last year).

Oil and gas: There were no changes to the tax rates applying to oil and gas companies. However, the energy profits levy (EPL) (which applies to profits of oil and gas companies at 35%) will be extended for an additional year, so the “sunset” will now be March 2029. As previously announced, the government confirmed that the EPL will be “switched off” earlier under the Energy Security Investment Mechanism if prices fall below certain thresholds. This mechanism will be legislated for in the upcoming Spring Finance Bill.

Investment funds

The only investment funds related announcement in today’s Budget was that the government will move ahead with introducing a new type of UK investment fund for professional and institutional investors, the Reserved Investor Fund (Contractual Scheme) or “RIF(CS)” or “RIF”. This follows the announcement at Budget 2020 that the government would carry out a review of the UK funds regime to consider reforms with the aim of enhancing the UK’s attractiveness as a location for asset management and fund domicile, and which has since seen the delivery of initiatives such as the introduction of the Qualifying Asset Holding Companies (QAHC) regime and enhancements to the tax regime for Real Estate Investment Trusts (REITs), among other developments. The RIF will be an unauthorised co-ownership contractual scheme with more flexibility than the current authorised co-ownership contractual scheme which already exists.

The RIF is primarily aimed at professional and institutional investors, as well as certain other investor categories such as certified high net worth investors. The RIF is expected to be particularly attractive for investment in UK commercial real estate. Part of the rationale for introducing the RIF is to provide an onshore alternative to offshore vehicles such as the Jersey property unit trust (JPUT). The government will begin legislating for the RIF in the Spring 2024 Finance Bill, with detailed tax rules to be determined in due course.

Personal tax

National Insurance contributions: Building on the cuts announced at Autumn Statement 2023, the government has announced further cuts to the main rates of NICs for employees and the self-employed. The Chancellor announced today that: (i) the main rate of Class 1 employee NICs will be reduced from 10% to 8%; and (ii) the main rate of Class 4 self-employed NICs will be reduced by a further 2% above the 1% already announced – i.e. from 9% to 6%. These changes will take effect from 6 April 2024. The government also announced that it would launch a consultation later this year to deliver on its commitment, set out in Autumn Statement 2023, to abolish Class 2 NICs for the self-employed entirely.

Non-dom regime: The government has announced the abolition of the remittance basis of taxation for non-UK domiciled individuals (“non-doms”). The existing regime will be replaced with a residence-based system from 6 April 2025. Under the new regime, individuals who have been UK tax resident for more than four years will pay UK tax on their foreign income and gains, regardless of whether they are remitted to the UK. There will be transitional arrangements for existing non-doms, including: (i) an option to rebase the value of capital assets to 5 April 2019; (ii) a temporary 50% exemption for the taxation of foreign income for the first year of the new regime; and (iii) a two-year Temporary Repatriation Facility to bring previously accrued foreign income and gains into the UK at a 12% rate of tax.

Property taxation:

• Capital gains tax (CGT): The government has announced that it will reduce the higher rate of CGT for residential property gains from 28% to 24%, with effect from 6 April 2024. This does not affect disposals of main residences, to which Private Residence Relief will continue to apply.
• Multiple Dwellings Relief (MDR): From 1 June 2024, the government is abolishing MDR, a bulk purchase relief in the Stamp Duty Land Tax regime which applies where a transaction includes the purchase of interests in more than one dwelling. MDR will still apply to transactions for which contracts are exchanged on or before 6 March 2024 (regardless of when they complete), and to transactions completed before 1 June 2024.
• Furnished holiday lettings (FHL) regime: The government will abolish the FHL regime from 6 April 2025, eliminating the tax advantage for landlords who let short-term furnished holiday properties in an effort to “level the playing field” between short-term and long-term lets. Draft legislation will be published in due course and will include an anti-forestalling rule, effective as of 6 March 2024.

Inheritance tax (IHT): In line with the changes to the nom-dom tax regime outlined above, the government also intends to move to a residence-based IHT regime. A consultation will be launched in due course and the government has confirmed that no changes will take effect before 6 April 2025.

UK ISA: With the aim of reinvigorating London as a venue to list companies, the government announced the launch of a UK ISA to encourage individuals to invest in UK equities, which will offer an additional £5,000 allowance on top of the existing ISA allowance.

Not covered in today’s budget

Corporation tax: No changes were made to the headline rate of corporation tax, which will remain at 25%.

Personal tax: There are no changes to the rates of income tax. Aside from the reduction of the higher rate of CGT for residential property gains described above, there are no other changes to existing rates of CGT.

Stamp taxes on shares: No changes to the current regime were announced in today’s Budget, and we are still awaiting the government’s response to the consultation on the modernisation of the stamp taxes framework which was launched in April 2023.