Below are a few of our key takeaways from the Chancellor’s Spring Budget and those we feel will have the most impact on small businesses and individuals in the coming 2024-25 tax year.
Key dates
The VAT registration threshold is to increase to £90,000 from 1 April 2024, while the National Insurance reduction and increase in HICBC threshold take effect from 6 April 2024. The cut in the top rate of residential capital gains tax applies from the same date. The abolition of the Furnished Holiday Lettings (FHL) regime and the replacement of the remittance basis rules take effect from April 2025.
Further National Insurance cuts
Following on from the National Insurance cuts announced at the time of the 2023 Autumn Statement, the Chancellor announced that the main primary Class 1 rate would fall to 8% from 6 April 2024. The rate was previously cut from 12% to 10% with effect from 6 January 2024. The further 2% cut will reduce the amount of Class 1 National Insurance payable by employees in 2024/25 by £754.
The self-employed are also to benefit from these cuts. At the time of the Autumn 2023 Statement, the Chancellor announced that the main Class 4 rate was to be cut from 9% to 8% from 6 April 2024. However, this is to be cut by a further 2% to 6% from 6 April 2024. This too will be worth up to £754 in 2024/25.
At the time of the 2023 Autumn Statement, the Chancellor announced that Class 2 National Insurance contributions are to be abolished from 6 April 2024. The Government are to consult later in the year on how this will be delivered.
Reduction in top rate of capital gains tax on residential gains
Currently, chargeable gains on residential property are charged at a rate of 28% where income and gains exceed the basic rate band (set at £37,700). This is to fall to 24% from 6 April 2024. The lower residential rate will remain at 18% where chargeable gains on residential property fall within the basic rate band.
Where the conditions for business asset disposal relief were met, gains on the disposal of a FHL which were not rolled over were taxed at 10%.
Increase in the VAT registration threshold
The VAT registration threshold is to rise from £85,000 to £90,000 with effect from 1 April 2024. The VAT de-registration threshold will rise from £83,000 to £88,000 from the same date.
High Income Child Benefit Charge
The High Income Child Benefit Charge (HICBC) claws back child income where the claimant or their partner have adjusted net income of £50,000 or more. The charge is equal to 1% of the child benefit for the tax year for every £100 by which adjusted net income exceeds £50,000. Once income reaches £60,000, the charge is equal to the full amount of the child benefit for the year.
The thresholds are increased and the claw back rates are reduced from 6 April 2024.
For the 2024/25 tax year, the abatement threshold is increased from £50,000 to £60,000. Once adjusted net income exceeds £60,000, the HICBC is equal to 1% of child benefit paid for every £200 by which adjusted net income exceeds £60,000. Once adjusted net income reaches £80,000, the charge will be equal to the child benefit for the 2024/25 tax year.
The HICBC is a complicated charge with a number of anomalies. Currently, a couple where both partners have adjusted net income of £49,999 (total combined income of £99,998) are able to keep their child benefit in full, whereas a couple where one partner has no income and the other has income of £60,000 will effectively lose all their child benefit in the form of the HICBC. To address this, the HICBC will be based on household income from April 2026.
British ISA
The Government are to introduce a British ISA with a separate £5,000 limit in addition to the usual ISA limit of £20,000. They will consult on the details at a later date.
Get in touch
To discuss how any of these changes may impact yourself or your business, please feel free to reach out to our friendly team on 01772 204102.