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Budget 2024: CGT, Non-Dom Status, Child Benefit, NI Adjustments

The Chancellor of the Exchequer, Jeremy Hunt, delivered a significant budget speech on March 6, 2024, introducing a series of measures aimed at addressing the UK's economic challenges, supporting households, and fostering growth. The budget comes at a crucial time as the UK faces recession pressures, with official figures indicating a contraction in the economy in the last two quarters of 2023. This article synthesizes key announcements from the 2024 budget that are particularly relevant to UK taxpayers, including businesses and individuals, integrating insights from various sources including the UK government and PwC UK.

 


Budget 2024: CGT, Non-Dom Status, Child Benefit, NI Adjustments


Economic Outlook and Key Announcements

The budget outlines the government's plans to navigate the recession, aiming for economic recovery by implementing a range of tax cuts, incentives, and support measures. Notably, the Chancellor announced significant reductions in National Insurance Contributions (NICs) and changes to the tax treatment of non-UK domiciled individuals, aiming to simplify the tax system and reduce the tax burden on workers and businesses.

 

National Insurance Contributions

From April 6, 2024, the main rate of Class 1 employee NICs will decrease by 2p from 10% to 8%, and the main rate of Class 4 NICs for self-employed earners will reduce by 3p from 9% to 6%. Additionally, the government plans to abolish Class 2 National Insurance and consult on its full abolition later this year.

 

Non-Domiciled Individuals

The current tax regime for non-UK domiciled individuals will be replaced with a residence-based system from April 6, 2025. Under the new system, individuals who have been tax resident in the UK for more than four years will be subject to UK tax on their foreign income and gains, with transitional arrangements for existing non-doms.

 

Support for Households and Cost of Living

In response to the cost-of-living crisis, the Chancellor extended support measures for households, including maintaining the Energy Price Guarantee at £2,500 for the next three months and abolishing the premium on prepayment meters. Additionally, the budget cancels the planned rise in fuel duty and extends the Draught Relief for pubs, highlighting the government's commitment to supporting UK households amidst economic pressures.

 

Boosting Employment and Supporting Businesses

The budget introduces comprehensive plans to boost employment, including removing barriers for older workers and those with health conditions. The pensions Annual Allowance will increase from £40,000 to £60,000.

 

Child Benefit Changes

The high-income child benefit charge threshold will increase from £50,000 to £60,000 from April 6, 2024, with a new tapered charge applying up to £80,000. The government is also considering a move to a household-based system for assessing this charge starting April 2026.

 

Capital Gains Tax and Inheritance Tax

The higher rate of Capital Gains Tax on residential properties will be lowered from 28% to 24%, effective from 6th April 2024. The Budget also hinted at future reforms towards a residence-based regime for Inheritance Tax, with further consultations promised.

 

Support for Businesses and the Creative Industries

The government made a landmark decision to make full expensing permanent, enabling businesses to write off the full cost of qualifying plant and machinery investments against their taxable profits. Additionally, over £1 billion in new tax reliefs was announced for the creative industries, including film studios and the independent film sector, underscoring the government's commitment to supporting growth and innovation.


Let's dive into the details of some of these announcements:



Announcement about Capital Gains Tax and Commentary

On the 6th of March 2024, the Chancellor of the Exchequer in the UK made significant announcements as part of the Spring Budget, with implications for taxpayers, businesses, and the broader economy. A key highlight from this announcement was the adjustment to Capital Gains Tax (CGT), which saw a reduction in the higher rate from 28% to 24%. This move is aimed at stimulating investment by making it more financially attractive for investors to sell assets by reducing the tax impact on their profits. However, the lower rate will remain at 18% for any gains that fall within an individual's basic rate band.

 

The rationale behind the reduction in CGT is to encourage more dynamic investment strategies and to stimulate activity within the UK's property and investment markets. Given the economic context, this adjustment can be seen as an effort to boost the attractiveness of the UK as an investment destination, potentially leading to increased capital inflows and contributing to economic growth. The reduction in CGT is particularly significant for investors holding assets that have appreciated in value, offering a more favorable tax treatment upon disposal of such assets.

 

From a strategic perspective, this move may also alleviate some pressures from the real estate market by making it less costly for individuals to sell properties. This could help in addressing some aspects of the housing crisis by potentially increasing the supply of available properties. However, it is essential to consider the broader impact, including on tax revenues and the distribution of wealth, as lower CGT rates tend to benefit higher-income individuals and investors disproportionately.

 

Implications for UK Taxpayers

The changes to CGT are likely to have mixed implications for UK taxpayers. On one hand, larger property investors stand to benefit from reduced tax liabilities on their gains, potentially enhancing the attractiveness of real estate investment. On the other hand, the unchanged lower rate for smaller gains highlights the targeted nature of this tax relief, aiming primarily at more significant investors.


For businesses and individuals contemplating property investments, this announcement underscores the importance of strategic financial planning. Considering the potential for increased property values and the comparative advantages of real estate investment, stakeholders should evaluate their portfolios and investment strategies in light of these changes.

 

In conclusion, the reduction in the higher rate of Capital Gains Tax from 28% to 24% represents a strategic decision aimed at encouraging investment and economic activity within the UK. While it offers immediate benefits to investors and can stimulate certain sectors of the economy, its long-term impact on tax revenues and wealth distribution requires careful monitoring and evaluation. This change reflects the.



The UK Chancellor's Announcements on Non-Dom Status - Overview and Commentary

In a bold move during the Spring Budget 2024 announcement on March 6th, the UK Chancellor of the Exchequer, the Rt Hon. Jeremy Hunt MP, presented a series of fiscal and policy adjustments aimed at restructuring the UK's financial landscape amid challenging economic times. Among the standout announcements was the abolition of the 'non-dom' tax status, a decision poised to significantly alter the taxation framework for residents with foreign domicile status in the UK.

 

The Abolition of Non-Dom Tax Status

Historically, the non-dom status allowed individuals residing in the UK but with a domicile in another country to limit the tax paid on income earned outside the UK. This status has been pivotal for many wealthy individuals, offering tax advantages that have made the UK an attractive place to live while maintaining financial ties abroad. The Chancellor's announcement marks a decisive shift away from this longstanding policy, reflecting the government's intent to establish a more equitable tax system.

 

Economic Context and Rationale

The decision to abolish non-dom status comes at a time when the UK economy faces significant headwinds. Official figures released prior to the budget indicated the UK had entered into a recession, with the economy contracting in the last two quarters of the previous year. This economic backdrop underscores the Chancellor's efforts to consolidate public finances and ensure a fair contribution from all residents. By closing this tax loophole, the government aims to foster a more balanced and just fiscal environment, ensuring that those who benefit from living in the UK contribute their fair share to its economy.

 

Impact and Analysis

The abolition of the non-dom status is anticipated to have broad implications, both for individuals who previously benefited from this arrangement and for the UK's appeal as a financial hub. For high-net-worth individuals, this change signifies a substantial alteration in their tax liabilities, potentially leading to increased tax payments on worldwide income and gains. This policy shift may also influence the decision of wealthy individuals and families considering the UK as a residence, potentially impacting the inflow of talent and investment.

 

However, from a fiscal perspective, this move is expected to bolster the UK's tax revenues, providing much-needed funds to support public services and investments in the face of economic challenges. It represents a stride towards a more transparent and equitable tax system, aligning the UK with international standards for tax fairness and responsibility.

 

The decision to abolish the non-domiciled tax regime could be seen as an attempt by the Conservative government to align more closely with public sentiment on tax fairness and to mitigate some of the criticisms leveled at it for favoring the wealthy. By removing this status, the government is signaling its commitment to creating a more equitable tax system where individuals contribute more equally to the UK's finances, regardless of their domicile status. This move could also be viewed strategically as it takes away a key policy platform from the Labour Party, potentially impacting the latter's future policy proposals and election promises.

 

However, this change raises questions about the UK's attractiveness as a destination for international talent and investment. The non-domiciled status has been one aspect that made the UK financially attractive to some international individuals. Its removal may lead to considerations about the mobility of wealth and whether this could lead to a decrease in investment in the UK. It will be important for the UK government to balance this policy change with other measures that continue to attract international talent and investment, crucial for the country's growth and global competitiveness.



The UK Chancellor's Announcements on Non-Dom Status - Overview and Commentary

In a bold move during the Spring Budget 2024 announcement on March 6th, the UK Chancellor of the Exchequer, the Rt Hon. Jeremy Hunt MP, presented a series of fiscal and policy adjustments aimed at restructuring the UK's financial landscape amid challenging economic times. Among the standout announcements was the abolition of the 'non-dom' tax status, a decision poised to significantly alter the taxation framework for residents with foreign domicile status in the UK.

 

The Abolition of Non-Dom Tax Status

Historically, the non-dom status allowed individuals residing in the UK but with a domicile in another country to limit the tax paid on income earned outside the UK. This status has been pivotal for many wealthy individuals, offering tax advantages that have made the UK an attractive place to live while maintaining financial ties abroad. The Chancellor's announcement marks a decisive shift away from this longstanding policy, reflecting the government's intent to establish a more equitable tax system.

 

Economic Context and Rationale

The decision to abolish non-dom status comes at a time when the UK economy faces significant headwinds. Official figures released prior to the budget indicated the UK had entered into a recession, with the economy contracting in the last two quarters of the previous year. This economic backdrop underscores the Chancellor's efforts to consolidate public finances and ensure a fair contribution from all residents. By closing this tax loophole, the government aims to foster a more balanced and just fiscal environment, ensuring that those who benefit from living in the UK contribute their fair share to its economy.

 

Impact and Analysis

The abolition of the non-dom status is anticipated to have broad implications, both for individuals who previously benefited from this arrangement and for the UK's appeal as a financial hub. For high-net-worth individuals, this change signifies a substantial alteration in their tax liabilities, potentially leading to increased tax payments on worldwide income and gains. This policy shift may also influence the decision of wealthy individuals and families considering the UK as a residence, potentially impacting the inflow of talent and investment.

 

However, from a fiscal perspective, this move is expected to bolster the UK's tax revenues, providing much-needed funds to support public services and investments in the face of economic challenges. It represents a stride towards a more transparent and equitable tax system, aligning the UK with international standards for tax fairness and responsibility.

 

The decision to abolish the non-domiciled tax regime could be seen as an attempt by the Conservative government to align more closely with public sentiment on tax fairness and to mitigate some of the criticisms leveled at it for favoring the wealthy. By removing this status, the government is signaling its commitment to creating a more equitable tax system where individuals contribute more equally to the UK's finances, regardless of their domicile status. This move could also be viewed strategically as it takes away a key policy platform from the Labour Party, potentially impacting the latter's future policy proposals and election promises.

 

However, this change raises questions about the UK's attractiveness as a destination for international talent and investment. The non-domiciled status has been one aspect that made the UK financially attractive to some international individuals. Its removal may lead to considerations about the mobility of wealth and whether this could lead to a decrease in investment in the UK. It will be important for the UK government to balance this policy change with other measures that continue to attract international talent and investment, crucial for the country's growth and global competitiveness.



Chancellor's Announcements on Child Benefit and Commentary and Analysis

In a significant announcement on the 6th of March 2024, Chancellor of the Exchequer, Jeremy Hunt, outlined a series of financial measures in the UK's latest budget, directly impacting working families and self-employed individuals. This article delves into the crucial updates regarding the Child Benefit changes and National Insurance adjustments for the self-employed, providing a comprehensive analysis of their implications.

 

Child Benefit Adjustments: A Step Towards Supporting Working Families

The Chancellor announced a pivotal change to the High Income Child Benefit Charge (HICBC), moving towards a household-based assessment by April 2026. In an immediate effort to support working families, the threshold for the HICBC will increase from £50,000 to £60,000, with Child Benefit no longer needing to be repaid in full until earnings exceed £80,000. This adjustment represents an average boost of £1,260 for around half a million working families across the UK, potentially reaching nearly £5,000 for some families when combined with tax cuts since the Autumn Statement.

 

This reform addresses a long-standing unfairness where two parents earning £49,000 each could receive full Child Benefit, while a single earner household exceeding £50,000 would face reductions. The Office for Budget Responsibility (OBR) suggests that the immediate changes to the HICBC will equate to an increase in hours worked, similar to around 10,000 more people entering the workforce on a full-time basis.

 

The move to a household-based assessment for the HICBC is a commendable step, reflecting a more equitable approach to supporting working families. By increasing the threshold and reducing the repayment rate, the government aims to alleviate financial pressure on middle-income families, encouraging higher work participation rates. However, the effectiveness of these measures in fostering long-term economic growth and workforce participation remains to be seen, necessitating careful monitoring and potential adjustments in response to economic conditions and family incomes.

 

The adjustments to Child Benefit and the HICBC reflect the government's commitment to supporting families, especially in times of economic uncertainty. The increase in Child Benefit rates will directly help families to better manage the costs associated with raising children. Adjusting the HICBC threshold, meanwhile, ensures a fairer distribution of financial support, targeting those who need it the most while asking those with higher incomes to contribute a bit more. These changes are likely to be welcomed by UK taxpayer companies and their employees, as they provide additional financial support and reflect a balanced approach to taxation and benefits.


National Insurance Adjustments for the Self-Employed 2024


National Insurance Adjustments for the Self-Employed

In a bid to promote entrepreneurship and support the self-employed, Chancellor Hunt announced a further reduction in Class 4 National Insurance Contributions (NICs) from 9% to 6%. This follows a reduction in the Autumn Statement and the abolition of the requirement to pay Class 2 NICs, marking a significant tax cut for self-employed individuals in the UK.

 

These changes, combined with the Autumn Statement adjustments, represent a tax cut of over £20 billion per year, translating to an average annual tax cut of £640 for more than 1.2 million workers in Wales alone. The OBR projects that these reductions will lead to the equivalent of around 200,000 extra full-time workers by 2028/29, as people are incentivized to increase their working hours and enter the workforce.

 

National Insurance Contributions (NICs) for Self-Employed

From April 2024, self-employed individuals will see a reduction in their NICs, which is a significant move aimed at boosting the earnings of those working for themselves. The main rate of Self-employed National Insurance (Class 4 NICs) will be cut from 9% to 8%. Moreover, from the 6th April 2024, individuals with profits above £12,570 will no longer be required to pay Class 2 NICs but will continue to receive access to contributory benefits, including the State Pension. This adjustment provides a tangible benefit to the self-employed, making a direct impact on their take-home pay and financial planning.

 

Economic Growth and Other Tax Measures

The budget also focused on stimulating economic growth, with the Chancellor expressing confidence that the UK has "turned a corner on inflation," and forecasting growth rates of 0.8% for the current year and 1.9% in 2025. To support businesses, the VAT registration threshold will be increased from £85,000 to £90,000 in April 2024, easing the administrative burden on smaller businesses and encouraging growth.

 

This policy adjustment aims not only to deliver a tax cut for working people but also to simplify the tax system for the self-employed by abolishing the Class 2 National Insurance contributions requirement. These changes underscore the government's commitment to reducing the tax burden on workers and simplifying the tax code to promote economic growth and workforce participation.

 

Impact on Individuals and Businesses

The reduction in National Insurance contributions is expected to have a wide-ranging impact, benefiting individuals, households, and the broader economy. For workers, this means increased take-home pay, providing immediate financial relief and potentially boosting consumer spending. Self-employed individuals, in particular, stand to gain from both the reduction in Class 4 rates and the abolition of Class 2 contributions, enhancing their financial flexibility and supporting entrepreneurial activity.

 

Businesses, too, are set to benefit from the Chancellor's announcement. Alongside the NIC changes, the Chancellor unveiled "the biggest business tax cut in modern British history," including permanent Full Expensing for investments in IT equipment, plant, and machinery. This move is designed to stimulate business investment, enhance productivity, and maintain the UK's competitive edge on the global stage. Additionally, the introduction of a significantly increased National Living Wage and reforms aimed at encouraging work and supporting those with health conditions or disabilities underscore the government's broader strategy to ensure economic growth is inclusive and sustainable.



Overall Commentary on The Chancellor Budget Speech on 6th of March 2024

The Chancellor's Budget Speech on the 6th of March 2024, as presented by Jeremy Hunt, marked a significant moment for UK taxpayers, encompassing a broad range of fiscal measures aimed at stimulating economic growth, supporting families, and transitioning towards a more sustainable and technologically advanced economy. This article delves into the key announcements and their implications for the average UK taxpayer.


Personal and Business Taxation

One of the headline measures was the reduction in National Insurance Contributions (NICs). Specifically, the main rate of Class 1 employee NICs will decrease by 2p to 8%, and Class 4 NICs for self-employed earners will drop by 3p to 6%, effective from 6 April 2024. These cuts are part of the government's broader strategy to ease the tax burden on workers and businesses, enhancing take-home pay and supporting self-employment​.


Support for Families and Child Benefit Changes

The Budget also addressed the High Income Child Benefit Charge, raising the threshold from £50,000 to £60,000, effective from 6 April 2024, with a tapered charge applying up to £80,000. This measure is designed to support families by ensuring more can benefit from child benefit without being penalized by higher taxes. Moreover, a consultation will explore moving to a household-based system for this charge from April 2026​.


Non-Domiciled Individuals

In a significant shift, the Chancellor announced the abolition of the current tax regime for non-UK domiciled individuals, to be replaced by a residence-based regime from 6 April 2025. This change will align the tax treatment of foreign income and gains with UK residents' status, simplifying the system and ensuring fairness. The new regime includes a transitional period with certain reliefs for existing non-doms​.


Capital Gains and Other Tax Measures

The Budget also introduced a reduction in the higher rate of Capital Gains Tax on residential properties from 28% to 24%, starting 6 April 2024. Additionally, the Furnished Holiday Lettings tax regime will be abolished from 6 April 2025, reflecting the government's ongoing tax simplification efforts​.


Pensions and Savings

Significant reforms to pensions were announced, including measures to enhance transparency in Defined Contribution pension funds and the Local Government Pension Scheme Funds in England and Wales. The government aims to ensure that UK equity allocations are increasing and that pension schemes deliver value for money, protecting long-term investment outcomes for savers​.


Furthermore, the introduction of a new UK ISA and British Savings Bonds provides additional tax-free saving options for the public, encouraging investment and saving​.


Investments in Science, Technology, and Renewable Energy

The Budget underscores the UK's ambition to become a science and technology superpower, with over £1 billion allocated for renewable energy auctions and substantial investments announced in the sector, including significant commitments from industry giants like AstraZeneca. These measures, alongside the development of new nuclear sites by Great British Nuclear, illustrate the government's focus on securing the UK's energy future and driving innovation​.


Agricultural Support and Environmental Initiatives

Farmers and the environment receive a boost with the extension to Agricultural Property Relief, emphasizing the government's commitment to supporting rural economies and environmental stewardship​.


The 2024 Budget represents a comprehensive approach to addressing the immediate needs of UK taxpayers while laying the groundwork for future prosperity. Through targeted tax cuts, support for families, and investments in key industries, the government aims to stimulate economic growth, enhance the competitiveness of the UK.


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