Spring Budget 2024: what UK business tax measures were announced?

The UK chancellor, Jeremy Hunt, presented his Spring Budget on 6 March 2024. In keeping with his previous fiscal events, this budget was presented as one for investment, lower taxes and "long term" growth.

In addition to the documents published as part of the Spring Budget, the government announced that it will bring forward a further set of tax administration and maintenance announcements on 18 April 2024 at a Tax Administration and Maintenance Day.

National Insurance cut announced

Despite the chancellor managing expectations on tax cuts over the past few months, he managed to find sufficient headroom to announce a further two per cent cut in the main rate of employee National Insurance contributions (NICs) from 10% to 8% from 6 April 2024. This follows the two per cent cut announced in the Autumn Statement, which took effect from 6 January 2024.

There will be a further two per cent cut to the main rate of self-employed NICs from 6 April 2024, reducing the rate of Class 4 NICs for the self-employed to 6%. The government also confirmed that it will also consult later in the year on abolishing Class 2 NICs.

Reform of the 'non-dom' regime

As had been heavily trailed in the press over the past week, the chancellor announced that the favourable remittance-based tax regime for non-domiciled individuals (non-doms) will be abolished and replaced with a new regime from 6 April 2025.

There will be transitional arrangements for existing non-doms claiming the remittance basis. The most important of these is a proposed two year "Temporary Repatriation Facility" which will allow individuals with accumulated foreign income and gains to remit them at a generous tax rate of 12%.

The measure will abolish the current regime and replace it with a simpler residence-based one. Individuals who opt into the new regime will not pay UK tax on any foreign income and gains arising in their first four years of tax residence, provided they have been non-tax resident for the last 10 years.

The government also announced its intention to move to a residence-based regime for inheritance tax – to take effect no earlier than 6 April 2025 – and it will consult in due course on the best way to achieve this. The initial proposal is that individuals will be liable to inheritance tax on their worldwide assets once they have been UK tax resident for 10 years.  This treatment would then continue for a further 10 years after they leave.  Existing "excluded property" trusts seem to be protected, as is the ability to create them until 6 April 2025.

As the reform of the non-dom regime has been a flagship Labour Party proposal (with the chancellor previously defending the regime) this will cause a dilemma for Labour ahead of the general election, as it will need to find alternative tax rises (or spending cuts) to fund its spending pledges. Should Labour form the next government, it is likely to adopt the measures for its first budget (none of which will be included in the current Finance Bill), but may balk at the generous transitionary provisions.

The Built Environment measures

Abolition of multiple dwellings relief

The government published a response to its consultation on transactions involving mixed-use properties and multiple dwellings. The response confirms that the government has decided not to amend the Stamp Duty Land Tax (SDLT) legislation on mixed-property purchases, however it did confirm that from 1 June 2024, Multiple Dwellings Relief (MDR), a bulk purchase relief for residential property, will be abolished.

Property transactions with contracts that were exchanged on or before 6 March 2024 will continue to benefit from the MDR regardless of when they complete, as will any other purchases that are completed before 1 June 2024.

Abolition of relief on furnished holiday lettings

The chancellor announced that the favourable tax rules afforded to owners of furnished holiday lets (FHLs) will be abolished from 6 April 2025. The aim is that it will eliminate the tax advantage for landlords who let short-term furnished holiday properties over those who let residential properties to longer-term tenants. This will be subject to an anti-forestalling rule (to apply from the date of the Budget, 6 March 2024) which will prevent the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains relief under the current FHL rules.

Reduction in capital gains tax rate for residential property

The government will introduce legislation in Spring Finance Bill 2024 to reduce the higher rate of capital gains tax for residential property gains from 28% to 24% with effect from 6 April 2024. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band. The reduction should benefit landlords in the private rental sector and second homeowners who wish to sell.

SDLT relief for acquisitions by Registered Social Landlords and public bodies

The government announced that legislation will be updated to ensure that from 6 March 2024, registered providers of social housing in England and Northern Ireland are not liable for SDLT when purchasing property with a public subsidy and public bodies will be exempted from the 15% anti-avoidance rate of SDLT when purchasing residential property with a value of more than £500,000.

First Time Buyers’ Relief for nominee purchasers

It was announced that from 6 March 2024, First Time Buyers’ Relief will be extended to individuals who use nominee and bare trust arrangements (which is common where a purchaser is trying to preserve anonymity) when buying a new lease over a dwelling that they intend to use as their main or only residence.

Reserved investor fund

The government confirmed that it will introduce legislation in Spring Finance Bill 2024 in relation to the Reserved Investor Fund (Contractual Scheme) (RIF), a new UK-based unauthorised contractual scheme to enhance the UK’s existing funds regime. As can be seen from the published summary of responses to the 2023 consultation on the RIF, it will be taken forward in a restricted form.

Growing UK business

Full expensing extended to leased assets

Following the introduction of permanent full expensing for business in last year's Autumn Statement, the chancellor also confirmed that the regime would be extended to leased assets (which currently remain excluded from the full expensing regime) when fiscal conditions allow and would publish draft legislation shortly.

Increase in VAT registration threshold

The chancellor announced that the VAT threshold – the point at which businesses are required to register for VAT, which has stood at £85,000 since 2017 –  would be increased to £90,000 from 1 April 2024.

Raising the VAT threshold has the potential to stimulate economic growth by removing a hindrance for businesses as they approach it, however, it seems a small increase given that the threshold has been frozen for seven years.

Tax relief for creative industries and cultural sector

The chancellor announced a package of measures to provide additional tax relief for the creative industries, including a new UK Independent Film Tax Credit from 1 April 2024 and a 5% increase in tax relief for UK visual effects costs in film and high-end TV, under the Audio-Visual Expenditure Credit (AVEC) to take effect from 1 April 2025.

To further strengthen the UK’s cultural sector, the government will set permanent higher rates of tax reliefs for theatres, orchestras, museums and galleries to continue its support for world-class productions. From 1 April 2025 these rates will be permanently set at 45% for theatres, museums and galleries’ touring productions, at 40% for their non-touring productions, and at 45% for orchestras.

Introduction of British ISA

To increase investment in UK companies the chancellor announced a specific £5,000 tax-free allowance for investment in UK equities (which would be on top of existing ISA allowances). The government will consult on the details.

Consultation on new Private Intermittent Securities and Capital Exchange System

The government is consulting on the Private Intermittent Securities and Capital Exchange System (PISCES), a new innovative market that will allow private companies to scale and grow. It will be interesting to see how these proposals develop – it is to be hoped that this will be a useful platform for companies operating employee share plans involving transfers of existing shares.

Extension of investment zones and freeports

The government announced further details on its investment zones (which aim to accelerate innovation in high-potential knowledge-intensive growth clusters across the UK and benefit from a package of tax reliefs). It confirmed investment zones will be extended from five to ten years in Scotland and Wales (matching the extension for England announced in the Autumn Statement).

The government also confirmed that the tax reliefs available in freeport sites would be extended from five to ten years.

Extension of Energy Profits Levy

Another of Labour's tax proposals adopted by the Conservative government was the announcement by the chancellor that the Energy Profits Levy, the temporary windfall tax on oil and gas companies (which is currently an additional 35% tax on top of the existing 40% headline rate of tax for those companies), will be extended for a further year (until 31 March 2029). It was originally due to end in 2026 but had already been extended by a further two years in the Autumn Statement 2022.

Osborne Clarke comment

As expected in an election year, this was a budget for people (in particular workers). Although there were some business tax announcements, few have immediate effect and many have been pushed out for consultation.

While the chancellor did not announce any immediate cut to income tax (which was rumoured to be on the table and would have benefitted more people than a cut in NICs which benefits workers and the self-employed), it would not be surprising if this found its way into the Conservative general election manifesto or the next Autumn Statement (if a general election is not called by then).

There was also no further announcement on the government's proposed improvements to tax-advantaged all-employee share schemes or the targeted reform of Employee Ownership Trusts and Employee Benefit Trusts. It is to be hoped that responses to the recent consultations will be published at the Tax Administration and Maintenance Day in April.

With opinion polls showing that the November cut to NICs did not help the Conservative Party's rating to any large extent, the question remains whether the chancellor has done enough in this budget to find favour with the voting public.