UK Budget: A quick summary

06 March 2024

This article was produced in collaboration with Alexandra Hewazy, Nick Bearne and Louise Towers.

Please note: The article does not constitute advice or any form of recommendation. Barclays International Banking does not offer tax advice, and professional advice should always be sought.

In the 2024 Spring Budget, the UK government set out its plans for taxing, borrowing and spending.

Easing the tax burden was central to the decision-making, but with the UK in recession, it’s a difficult task. Time will tell whether Chancellor Jeremy Hunt has struck the right balance between prudence and political appeal. 

In this article, we summarise some of the key announcements, and what they could mean for wealth holders.

Income tax 

With the cost-of-living crisis continuing to bite, the possibility of income tax cuts was subject to intense speculation in the run-up to Budget Day. Unfortunately, the current macroeconomic environment leaves limited room to manoeuvre. 

In the end, the government opted for a less costly 2p cut in National Insurance rates, which should save the average employee around £450 per year. This is in addition to an identical cut announced in the Autumn Statement (which took effect in January). The move was designed to boost the numbers of people in work, and simplify the “double taxation” on income (i.e. National Insurance and income tax), with the Chancellor pledging further National Insurance cuts in the future, conditions permitting. 

However, personal tax thresholds remained frozen, which means as wages rise, more people could be pushed into higher tax brackets.   

Real estate 

Residential property is a topic close to many voters’ hearts, and there were a number of property-themed measures announced. 

The main surprise was the unveiling of cut in capital gains tax on residential property, from 28% to 24%. This was based on evidence that suggests a lower tax rate would drive more property transactions. 

Despite pre-Budget rumours, there was no specific support for first-time buyers. Instead, the Chancellor focused on the rental market by abolishing tax relief on furnished holiday lets, with the aim of freeing up more homes for long-term rental. 

Stamp duty relief on sales of multiple dwellings was also abolished, as a further revenue raising device.

Non-Dom taxation

The government also announced an overhaul of the tax rules for non-domiciles i.e. people living in the UK whose home for tax purposes is overseas. 

From April 2025, new arrivals to the country will be exempt from UK tax on foreign income and gains for the first four years of their residency, and can bring them to the UK tax-free (although they would lose their personal allowances). After four years of residency, however, they will be subject to tax on their worldwide income and gains. While there will be further consultation on how inheritance tax would be treated, there is a suggestion that worldwide inheritance tax would apply after ten years of UK residence.  

In the interim, there will be transitional arrangements for current non-doms to encourage investment into the UK. This will include a 2-year period to bring wealth held overseas into the UK at a 12% rate of tax, as well as reducing their exposure to tax on foreign income to 50% in the tax year 2025/26. 

Businesses, drivers, hospitality, performing arts and more…

In positive news for small businesses, the threshold for VAT registration was raised from £85,000 to £90,000 – potentially exempting thousands of enterprises. The government also hopes to extend the “full leasing” regime announced in November, widening the scope for tax breaks to include leased assets, provided conditions allow. 

Drivers and the hospitality sector were also rewarded. Duty on both fuel and alcohol have been frozen and will remain unchanged for the next 12 months. 

Meanwhile, the arts sector received a significant boost, with a previously temporary higher tax rate relief becoming permanent – affecting orchestras, museums, theatres and galleries. Touring orchestras and non-touring productions will also see higher relief rates become permanent, at 45% and 40%, respectively. 

Among the measures designed to boost government coffers were a new tax on vaping – and a one-off increase in tobacco “to maintain the financial incentive to choose vaping over smoking”. In addition, any air passengers travelling outside of economy class will see an increase in Air Passenger Duty, while the windfall tax on oil and gas company profits was extended until 2029. 

Pensions and ISAs 

The government revealed plans to consult on a new British ISA, which would offer an additional £5,000 tax-free allowance to invest in UK equities. The move is designed to encourage more people to invest in domestic assets.

In a similar vein, the Chancellor announced measures to monitor the asset allocation of UK pension funds. Those considered to have insufficient exposure to domestic investments could face “further action” – although it is not yet clear what form such action could take. 

Capital gains and dividend tax allowances

While there was nothing new on capital gains or dividend tax, several changes to tax-free allowances announced in last year’s Autumn budget are due to take effect in April. As a reminder, the tax-free allowance for capital gains will be halved from £6,000 to £3,000 (having already been cut from 12,300 in 2023). Similarly, the tax-free allowance for dividends will fall from £1000 to just £500. 

Anything above the annual allowance is taxable, so it’s important to plan ahead to make the most of these exemptions, and to avoid paying unnecessary tax. 

Final reflections

The topics highlighted above are perhaps the most significant, but do not reflect the full list of fiscal measures announced today. It will take time to assess their impact on the UK economy, where an uncertain outlook prevails.

For wealth holders, understanding the changing tax rules and building them into your financial planning can help you make the most of assets – and leave you better placed to achieve your long-term wealth goals.

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