In his last expected budget before the general election, the Chancellor confirmed the heavily trailed 2p cut in National Insurance contributions, a shake-up of the ‘non-dom’ tax regime and the creation of a ‘UK ISA’.
However, primarily due to the continued freezing of personal allowances and thresholds, the overall tax burden as a proportion of gross domestic product will continue to rise.
Here’s our summary of the key points and what they mean for your finances.
National Insurance
The main rate on National Insurance (NI) paid by employees will be reduced from 10% to 8% from 6 April, with self-employed rates falling from 8% to 6%.
In the Autumn Statement, the government committed to abolishing Class 2 NICs entirely for the self-employed. A consultation (one of several) on the reforms is expected later this year.
Capital Gains Tax on second properties
From 6 April, the higher rate of Capital Gains Tax (CGT) for residential property sales will be cut from 28% to 24%. The lower rate will remain at 18% for any gains that fall within your basic rate tax band.
Private Residence Relief stays in place, meaning that most residential property sales will be free from tax.
Childcare
The High-Income Child Benefit Charge will be reformed to consider household income rather than your individual income. This will remove the unfairness for families with one higher earning parent. With changes to HMRC systems needed, these changes will be introduced from April 2026.
An interim measure introduced from April will see the threshold raised from £50,000 to £60,000 and the top of the taper where it is withdrawn will be increased to £80,000.
Furnished holiday lettings
Incentives for landlords to offer short-term holiday lets rather than longer-term homes will be removed by abolishing the Furnished Holiday Lettings tax regime. This will take effect from 6 April 2025.
UK ISA
A new UK ISA will be introduced to support investment in UK businesses with an annual allowance of £5,000. A consultation will seek views on the types of investment that should qualify and how long it could take to launch the product.
This additional tax-free allowance will sit alongside the £20,000 that can be invested across other ISA wrappers currently available.
The current ISA allowance has remained unchanged since 2017-18.
Although an increase in options is welcomed, this will add further complexity to the ISA regime.
British Savings Bond
A new British Savings Bond available through NS&I (National Savings & Investments) will offer a guaranteed fixed rate of interest over a three-year period for sums between £500 and £1 million. The Bond will be available from this April.
NatWest share sale confirmed
The retail offer is expected to raise up to £4bn for the government. Specific details about the offer, such as the share price and the number of shares available, are expected to be announced in the coming weeks.
UK private share trading reforms
The Treasury confirmed plans to allow private UK companies to trade their shares on new exchanges by the end of the year, in a further effort to boost London’s capital markets and the number of future initial public offerings.
Non-UK domiciled tax regime
The current tax rules for non-UK domiciled individuals (non-doms) will be abolished and replaced with a new system from April 2025. There will be no tax to pay on overseas gains & income in the first four years of residency, after which non-UK domiciles will pay the same rate of tax on overseas gains & income as they would on UK gains & income. Transitional rules will apply for existing non-doms.
Liability to inheritance tax (IHT) also depends on domicile status and location of assets. Under the current regime, no inheritance tax is due on non-UK assets of non-doms until they have been UK resident for 15 out of the past 20 tax years. The government will consult on the best way to move IHT to a residence-based regime.
Other measures
Fuel Duty: will be frozen for another 12 months, extending the temporary 5p per litre cut and cancelling the planned inflation-linked increase.
Alcohol Duty: extended from 1 August 2024 until 1 February 2025.
New levy on vaping: introduced from October 2026 to discourage non-smokers to take up vaping. To ensure vapes continue to play a role in helping smokers give up cigarettes, tobacco duty will be increased at the same time.
HMRC administrative reforms
From 1 April 2024, personal representatives of estates will no longer need to have sought commercial loans to pay inheritance tax before applying to obtain a ‘grant of credit’ from HMRC.
HMRC’s digital services will be improved to support income taxpayers to pay by instalments.
VAT threshold
The VAT threshold will be raised from £85,000 to £90,000 from 1 April 2024.
This will be welcomed by small businesses, but it is the first increase since it was frozen in 2017/18 and well behind inflationary increases.
The deregistration threshold will increase from £83,000 to £88,000.
Further details
The EQ Investors team will continue to review the changes and their impacts over the coming days and weeks.
Please do get in touch if you have any questions or would like more information.
Please remember, this content is provided for information purposes only. Investment involves risk. Past performance is not a guarantee or indication of future results. Investment return and the principal value of an investment may go up or down and may result in the loss of the amount originally invested. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability.
