UK Spring Budget 2024 Summary

Chancellor Jeremy Hunt delivered his Spring Budget on Wednesday 6 March. The key theme was growth, with the long-term development of the economy and growing the workforce (via tax changes to ‘make work pay’) as the headline announcements.

The economic backdrop was difficult for the Chancellor with recent confirmation that the UK was technically in recession. However, the Chancellor’s focus was positive, centring on the progress made in reducing inflation from 11% to 4%, with the Office for Budget Responsibility forecasting a further fall to 2% by quarter 2, 2024. Reducing inflation has been the Government’s stated priority in recent times and so this news represented welcome relief from an otherwise gloomy financial position. The hope is that with inflation falling back to its target level, the groundwork is laid for other economic matters to improve.

From an offshore perspective there was a very significant announcement, with confirmation of changes to the current tax regime for ‘non-dom’ taxpayers. These are individuals who are UK resident but neither domiciled nor deemed domiciled in the UK. This group of taxpayers is relatively small in number in the overall context of the UK taxpaying population, but nonetheless important given the amount of tax they collectively pay. Full details of the changes announced can be found in this article which also includes our comment on the likely impact of the changes and some of the options available for those affected. 

Specific Matters

There were a number of key announcements which were collectively presented as tax cutting measures. This was expected given the forthcoming General Election in the UK. However, one important matter was not addressed directly by the Chancellor, being a continuation of the policy of freezing the level of the personal income tax allowance. Over time, as the impact of inflation is factored in, this ‘fiscal drag’ will likely mean more tax being paid by the average UK household despite the changes announced. 

Details of the key measures announced are set out below. 

Individuals

• National Insurance (NI) rates are to be cut from 6 April 2024 for employees with a decrease from 10% to 8% and for self-employed workers a decrease from 9% to 6% (after factoring in a previously confirmed reduction).  It is estimated that the cut will be worth about £450 per annum to someone on a £35,000 full-time salary. This rate reduction, together with the Chancellor’s comments regarding the ‘unfairness’ of NI in its application, suggested a leaning towards the eventual abolition of NI in the UK altogether. However, with a General Election looming in the UK, these comments were widely taken as political positioning rather than a firm indication of policy change
• Capital Gains Tax rate for residential property gains will be reduced from 28% to 24%. This reduction was announced with reference to the ‘Laffer Curve’, an economic model which suggests that despite a lower rate of tax applying, more tax would be generated for the Government overall as the lower rate would lead to an increase in chargeable property sales
• The launch of a new UK ISA, with a £5,000 tax free allowance (in addition to the existing ISA allowances) to encourage investment in UK assets
• Abolition of the Furnished Holiday Lettings tax regime to encourage property owners to let their properties for longer term rental to provide more housing availability

Non-Domiciles

• Abolition of the longstanding non-dom regime from 6 April 2025, with a new ‘modern, simpler and fairer’ residence-based regime taking its place, read more here

VAT

• An increase in the VAT registration threshold for small businesses from £85,000 to £90,000
• Continuation of the freeze on alcohol duty to encourage spending in the ‘Great British Pub’
• Maintaining a previously introduced 5p cut in fuel duty, extending this for a further 12 months
• New duty introduced on vaping products from October 2026, along with a one-off increase in tobacco duty at the same time. These changes were intended to raise revenue to support public services

Isle of Man Considerations

The end of the long-standing non-dom regime, replaced with a new residence-based system for formerly non-UK resident individuals, represents a major change in UK policy. Reports suggest that there has been consternation from many within the non-dom community with two key questions raised being ‘When do I need to leave the UK by?’ and ‘Where shall I go’? Perhaps there is an opportunity for the Isle of Man to attract some of these High Net Worth individuals? The arrival of even a small percentage of these individuals, who are often entrepreneurial in their outlook, could make a positive difference to the Isle of Man’s economy.

Looking at the new regime, it is worth noting that it will give a similar tax result to those coming to the UK as for those who come to the Isle of Man and are able to avail of the Island’s little used ‘Key Employee Concession’. As the Isle of Man government seeks to attract economically active new residents to the Island, perhaps an extension of the KEC might be considered to encourage new arrivals? This could be easily achieved by extending the range of individuals who might qualify and removing the current application basis of the measure, making the treatment automatic for those qualifying individuals.

The reduction in UK NI rates contrasts with what was announced in the Isle of Man budget a few weeks ago, where rates were held constant. Both jurisdictions seem to be weighing up possible changes to their respective NI regimes in future, and it will be interesting to see how far the two systems might diverge and how this will impact the Isle of Man’s competitive position in attracting and retaining economically active individuals. 

Equiom Tax Services Limited offers both global insight and local knowledge to advise individuals and businesses facing a diverse range of international tax challenges. Get in touch with Kevin Cowley or Andrew Cardwell if you have any questions regarding any of the above topics, or to discuss how Equiom can support you.

This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. This article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained within this article without obtaining specific professional advice. Please contact Equiom Group to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees, and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.