Spring Budget 2024
Chancellor of the Exchequer, Jeremy Hunt, has delivered his Spring Budget and we summarise below the key announcements and other changes taking effect:
Property Taxation
From 6 April 2024, the main rate of Capital Gains Tax (CGT) for residential property gains will reduce from 28% to 24%. Any residential gains falling within the basic rate tax band (up to £37,700) that has not already been utilised by income, will remain subject to CGT at the rate of 18%.
As previously announced, the tax free Annual Exempt Amount for capital gains will reduce from £6,000 to £3,000 from 6 April 2024.
The Furnished Holiday Let (FHL) tax regime is set to be abolished from April 2025, such that holiday lets will be subject to tax in the same way as ordinary rental properties. As a result, we expect that landlords of FHLs will lose the benefit of:
Capital Allowances on the cost of certain items, although tax relief will still be available for the Replacement of Domestic Items and for normal repair and maintenance costs.
Full deduction of interest charges on borrowings against profits. Relief will instead only be available at the 20% basic rate of tax.
FHL profits being ‘Relevant Earnings’ for pension contributions purposes. Pension contributions are restricted to the higher of £3,600 and an individual’s Relevant Earnings, which largely consist of employment and trading income.
Access to CGT reliefs, such as Roll Over Relief, Hold Over Relief and Business Asset Disposal Relief.
We await the draft legislation to fully understand the impacts. For those that have FHLs and have been considering making transfers of property, perhaps as part of their succession plans, it may be sensible to bring such transfers forward if it would allow access to valuable CGT relief. Anti-forestalling clauses are expected in the legislation, so it is important to seek advice before making any decisions.
Stamp Duty Land Tax (SDLT) Multiple Dwellings Relief is set to be abolished from 1 June 2024. The Relief allowed the SDLT payable on the purchase of two or more properties to be reduced to broadly what would have been payable had the properties been purchased in separate transactions from different sellers.
The Government also consulted on SDLT for Mixed Property Purchases, where there is both residential and non-residential property and have concluded to leave the rules unchanged. A welcome announcement as the proposed changes would have increased the SDLT payable on the purchase of farms that included residential property.
Personal Tax
The Chancellor announced a further 2% cut in National Insurance Contributions (NICs) for both employees and the self employed. From 6 April 2024, employees will pay Class 1 NICs at a rate of 8% on earnings between £12,570 and £50,270, whilst the self-employed will pay Class 4 NICs at a rate of 6%. Both will pay NICs at a rate of 2% on earnings in excess of £50,270.
The High Income Child Benefit Charge threshold will increase from £50,000 to £60,000 from April 2024 and Child Benefit will only be fully clawed back on income of £80,000 and above. There are plans to make the system fairer and change the assessment to a household income basis from April 2026.
There are plans for a new UK ISA allowing an additional annual investment of £5,000 in UK equities. The Government are currently consulting on how to implement this effectively.
The ‘non-dom’ tax regime will be abolished from April 2025 and replaced with a new system that will mean non UK domiciled individuals will pay the same tax as after 4 years.
Inheritance Tax
From 6 April 2025 the scope of Agricultural Property Relief (APR) is set to be extended to land managed under environmental agreements to ensure that Inheritance Tax legislation does not disincentivise putting land into environmental use. Rather than creating a specified list of different environmental agreements, ‘Relief will be available for land managed under an environmental agreement with, or on behalf of, the UK government, Devolved Administrations, public bodies, local authorities, or approved responsible bodies.’
It has also been confirmed that APR will not be restricted to tenancies of at least 8 years which had been proposed in a previous review of tenant farming.
Better late than never, a working group is being established to provide clarity on the taxation of ecosystem service markets, such as carbon credits and Biodiversity Net Gains. Clarification on the tax implications of the production and sale of ecosystem service units should help landowners to confidently make decisions in this new and uncertain area.
VAT
The VAT registration threshold is set to increase from £85,000 to £90,000 from 1 April 2024.
The turnover threshold for deregistration is set to increase from £83,000 to £88,000 from 1 April 2024.
There are some significant changes in this pre-election Budget for those holding multiple residential properties, particularly FHLs. Perhaps though the next Budget will be more interesting, with the potential for the next Parliament, and possibly new Government, having to increase tax revenues to support public services if growth remains slow.
Tax will always be a significant factor for most rural businesses, as land and property prices are substantial and so is the associated tax exposure. Whilst attention is often paid to annual Income Tax liabilities, it is vital that regular consideration is also given to capital taxes and the liabilities that can arise on sales, gifts and death, particularly as legislative changes and case law alter tax reliefs over time.
Victoria Paley ACA CTA
Senior Tax Manager
Victoria joined the practice in July 2019 having worked in accountancy and tax in the rural sector since 2010. As a Chartered Accountant and Chartered Tax Adviser Victoria spends most of her time advising family farming businesses on Capital Gains Tax and Inheritance Tax matters primarily in relation to succession planning and capital transactions.
Outside of work Victoria spends most of her time running around after her two young children and riding her horse. Having always loved to travel, Victoria hopes to resume exploring the world with her family once the children are a little older!