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Spring Budget

British flag on the background of the historic building of Londo

On March 6th, the UK government unveiled a series of pivotal reforms aimed at steering the nation towards a brighter future. Here are the key announcements from the Spring Budget that may capture your interest:

Replacing Non-UK Domicile tax rules with a residence-based regime

The government also announced an overhaul of the tax rules for non-domiciled a tax regime, which offers certain tax advantages to people who live in the UK but who are not settled here permanently. This is likely to be abolished and replaced with a new residency-based system in April 2025. People who move to the UK will not pay taxes on foreign income or gains for the first four years, however after this period they will be subject to tax on their worldwide income and gains. While there will be further consultation on how inheritance tax would be treated, there is a suggestion that worldwide inheritance tax would apply after ten years of UK residence.

In the interim, there will be transitional arrangements for current non-doms to encourage investment into the UK. This will include a 2-year period to bring wealth held overseas into the UK at a 12% rate of tax, as well as reducing their exposure to tax on foreign income to 50% in the tax year 2025/26.

Income Tax- National Insurance contributions (NICs) 2% rates cut from 6 April 2024

The Chancellor Jeremy Hunt announced a further 2p cut to national insurance contributions, telling MPs that he wanted to help families with “permanent cuts in taxation” as part of his ‘Budget for long-term growth’.

This latest cut will reduce the employee national insurance rate by 2 percentage points, from 10 per cent to 8 per cent from April. Self-employed national insurance will also decrease by 2 percentage points from 8 per cent to 6 per cent.

The move was designed to boost the numbers of people in work, and simplify the “double taxation” on income (i.e., National Insurance and income tax), with the Chancellor pledging further National Insurance cuts in the future, conditions permitting.

However, personal tax thresholds remained frozen, which means as wages rise, more people could be pushed into higher tax brackets.

Real estate and Capital Gain

Residential property is a topic close to many voters’ hearts, and there were a number of property-themed measures announced.

The main surprise was the unveiling of cut in capital gains tax on residential property, from 28% to 24%. This was based on evidence that suggests a lower tax rate would drive more property transactions.

Private Residence Relief will continue to apply, meaning the vast majority of residential property disposals will pay no Capital Gains Tax while Stamp duty relief on sales of multiple dwellings was also abolished.

Despite pre-Budget rumours, there was no specific support for first-time buyers. Instead, the Chancellor focused on the rental market by abolishing tax relief on furnished holiday lets from next year, with the aim of freeing up more homes for long-term rental. About 127,000 properties in the UK are registered under the FHL regime.

Pensions and ISAs

The government revealed plans to consult on a new British ISA, which would offer an additional £5,000 tax-free allowance to invest in UK equities on top of the existing annual £20,000 allowance. The move is designed to encourage more people to invest in domestic assets.

In a similar vein, the Chancellor announced measures to monitor the asset allocation of UK pension funds. Those considered to have insufficient exposure to domestic investments could face “further action” – although it is not yet clear what form such action could take.

VAT registration threshold: increase to £90,000 from 1 April 2024

The government will increase the VAT registration threshold from £85,000 to £90,000.

British flag on the background of the historic building of Londo
British flag on the background of the historic building of London, UK