On 6 March 2024, Chancellor Jeremy Hunt delivered his Spring Budget 2024 to Parliament (Budget 2024: Documents and HM Treasury News Story). It follows the Chancellor's Autumn Statement 2023 (see FC Feature 22 November 2023) and sets out fiscal and policy measures to fulfil the government's objectives of stimulating economic growth and investment as well as reducing government borrowing and the overall tax burden for workers.
The government will also publish a further package of technical tax policy proposals on Tax Administration and Maintenance Day, to be held on 18 April 2024. Some of the measures announced in the Budget will be included in a Spring Finance Bill 2024 that will become the Finance (No. 2) Act 2024 (Collection: Spring Finance Bill 2024). Others will be legislated for in the Finance Bill 2025 and some will be enacted at an unspecified time in the future (or are subject to consultation).
The headlines for business include those set out below.
Tax
- Capital allowances reform – the government intends to extend the permanent full expensing policy to leased assets when fiscal conditions allow. Currently, the relief allows companies to claim 100% first year capital allowances on qualifying main rate plant and machinery, offsetting the full cost of investment in these assets against taxable profits in the year expenditure is occurred. Special rate assets attract a first year allowance of 50%. Draft legislation will be published shortly for technical consultation, although implementation is subject to future decision.
- National Insurance contributions – from 6 April 2024, the main rate of Class 1 employee national insurance contributions will reduce by 2% to 8%. This follows a 2% cut announced in the Autumn Statement 2023, which came into effect on 6 January 2024 (see FC Feature 22 November 2023). The government will also make a further 2% cut to Class 4 NICs paid by the self-employed on top of the 1% cut announced in the Autumn Statement, reducing the rate from 9% to 6% from the same date.
- Taxation of non-UK domiciled individuals – from 6 April 2025, the current regime will be abolished and replaced with a residency-based system. Qualifying individuals will not pay any tax on foreign income or gains in the first four years after becoming a UK tax resident, even if these are remitted to the UK, after which they will pay full UK taxes, including on assets they have settled in an offshore trust. Transitional arrangements for existing non-domiciled individuals will apply for a two year period from April 2025. Inheritance tax will also be extended fully to these individuals from 6 April 2025, with new rules to be formulated after consultation. (Technical Note: Changes to the taxation of non-UK domiciled individuals).
- VAT threshold – the VAT registration threshold will increase from £85,000 to £90,000 from 1 April 2024. The deregistration threshold will increase from £83,000 to £88,000 from the same date and both thresholds will be frozen at the increased amounts.
- Economic crime levy – from the financial year beginning on 1 April 2024, the economic crime levy payable by AML-regulated entities with annual UK revenue greater than £1 billion will increase from £250,000 to £500,000 per annum. It will apply to these large entities by reference to their revenues for an accounting period ending on or after 1 April 2024.
- Reserved Investor Fund (RIF) – the government will legislate in the Spring Finance Bill 2024 to introduce a RIF regime. The regime is intended to provide a lower-cost, more flexible, UK-based unauthorised contractual scheme, as an alternative to the existing authorised contractual scheme. Detailed rules, including the tax treatment, will follow in a statutory instrument at a later date and take into account responses received by the government to its earlier consultation (HM Treasury Response: RIF). The operative date of the regime will be set out in the legislation.
- Umbrella companies – on Tax Administration and Maintenance Day, the government will provide an update on the outcome of its June 2023 Consultation: Tackling employment and tax non-compliance in the umbrella company market. New guidance to support workers and businesses that use umbrella companies will follow in Summer 2024.
Investment and growth
- Private Intermittent Securities and Capital Exchange System (PISCES) – the government has published Consultation: PISCES, which sets out detailed proposals for a new secondary market platform to facilitate the periodic trading of existing shares in privately held companies. PISCES will be initially established as a regulatory sandbox, using the financial market infrastructure (FMI) sandbox regime created by the Financial Services and Markets Act 2023. The sandbox structure will allow the government to temporarily modify or disapply provisions in the Companies Act 2006 that restrict public offers by private companies and other legislation relating to market abuse and markets in financial instruments. The government is also considering whether employees should be allowed to buy shares in their companies on PISCES, as well as to sell shares as existing shareholders. Legislation to create the PISCES sandbox will be laid before Parliament later this year and the FCA will consult on the underlying regulatory framework before the platform is established at the end of 2024.
- ISA reform – the government is consulting on the design and implementation of a new ISA allowance of £5,000 per year for UK assets in addition to the existing £20,000 annual ISA allowance, with the same tax benefits (Consultation: UK ISA). The consultation explores different investments that could be included in a UK ISA, including equity shares admitted to listing or publicly traded on UK markets, investments in authorised unit trusts and investment trusts, and corporate bonds and gilts. Responses to the consultation should be submitted by 6 June 2024.
- NatWest retail offer – subject to market conditions, the government intends to sell part of its shareholding in NatWest in an offer to retail investors no earlier than Summer 2024 (Factsheet: NatWest Retail Offer).
- Pensions reforms – building on the wide-ranging reforms announced in the Autumn Statement 2023, the FCA will consult in Spring 2024 on new requirements for defined contribution pension funds to disclose the breakdown of their asset allocations, including UK equities.
First published on the Employment and Corporate News Service on 6 March 2024.
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