Tax

The biggest surprise in the Spring Budget was perhaps the raucous reaction given by the House of Commons to a fairly muted set of tax proposals.

While the non-dom reform and NICs cuts stand out as significant changes they had been so well trailed in the press they were of no surprise. In addition to these, the Chancellor also announced measures including an extension of the energy profits levy and a reduction in the capital gains tax rate on residential property disposals.

Here's a snapshot of the measures announced:

• Non-dom regime reforms: The abolition of the UK's current tax regime that applies to non-domiciled individuals (Non-Doms) which, if the Conservatives win the next general election, would come into effect from 6 April 2025. Read this briefing for more. 
  
  
• Employee and self-employed NICs: Rates of employee and self-employed National Insurance contributions will be reduced for the second time this year. From 6 April 2024, the main rate of Class 1 employee NICs, charged on annual earnings between £12,570 and £50,270, will be cut from 10% to 8%. When combined with the 2% cut that took place at the start of the year, this represents a one-third reduction in the 12% rate that previously applied. However, employers do not have an equivalent reason to celebrate since the rate of Class 1 employer NICs on earnings above £9,100 per year will remain unchanged at 13.8%.

The main rate of self-employed Class 4 NICs, charged on annual profits between £12,750 and £50,270, had already been reduced to 8% for the 2024/25 tax year but was cut even further in the Budget to 6% from 6 April 2024. The requirement for self-employed individuals to pay Class 2 NICs, charged at £3.45 per week, ends from 6 April 2024 but in the Budget, the Government went further and announced that it will launch a consultation later in the year to fully abolish Class 2 NICs.

• Real Estate taxation: Abolition of multiple dwellings relief for SDLT and furnished holiday lettings regime. Capital gains tax rate for residential property reduced to 24%.
  
  
• Business taxation: Full expensing sought to be extended to leased assets. VAT registration threshold increased to £90,000.
  
  
• Energy Profits Levy: Sunset of the Energy Profits Levy has been extended until 31 March 2029. 
  
  
• Reserved Investor Fund (RIF): Introduction of new unauthorised UK fund vehicle. The RIF is expected to be primarily of interest to commercial real estate investors (due to its VAT treatment). The RIF will be transparent for tax on income and not subject to tax on gains, with transfers of units being free from stamp taxes. Investors will generally only be subject to tax on capital gains when they dispose of their units. The RIF is to be available to professional investors, as well as those who invest at least £1m (or have already invested in it). The introduction of this new fund vehicle is a welcome development, which, for the right investor base, may be a viable onshore alternative to the Jersey Property Unit Trust (JPUT). Although the Spring Finance Bill 2024 contains provisions giving the Treasury the power to make regulations containing detailed tax rules for the RIF, no date for the introduction of the RIF has been given.
  
  
• Transfer of Assets abroad: New anti-avoidance provisions relating to transfers by close companies will be added to the already complex transfer of assets abroad (TOAA) regime. The TOAA regime is designed to prevent UK-resident individuals from avoiding UK tax by a transfer of assets to a person who is not UK resident.
  
  
• Economic Crime Levy: The rate of economic crime levy will be increased from £250,000 to £500,000 per annum for "very large entities" (businesses regulated for Anti Money Laundering purposes with UK annual revenue greater than £1 billion.)

Rather than one big Finance Act, it seems that 2024 will be peppered with multiple mini Finance Acts.  The first Finance Act of 2024 received Royal Assent on 22 February 2024 and includes legislation for the permanent full expensing of plant and machinery.  A second Finance Bill was published on 13 March 2024 and includes measures announced in the Spring Budget that took immediate effect or will come into force at the start of the new tax year.  It is expected that there will be at least one more finance bill this year, as legislation to implement the BEPS Pillar Two undertaxed profits rule has not been included in either of the first two pieces of legislation and is due to take effect from 31 December 2024.

HMRC has recently changed its published guidance to make clear that it considers that increases in capital contributions made solely to fall outside the salaried members rules will be ineffective for that purpose.  If the salaried members rules apply to a member of an LLP, they are treated as an employee (rather than as being self-employed) for tax purposes.  For more detail please see our briefing.