The taxable turnover threshold that determines whether businesses should be registered for VAT increased to £90,000 from 1 April 2024. The previous limit was £85,000. The taxable turnover threshold that determines whether businesses can apply for deregistration was also increased from £83,000 to £88,000 on the same date. It had been previously announced that the rates would be frozen until 31 March 2026. However, the Chancellor’s announcement makes the first change in 7 years to the rates and has been designed to help SMEs.

Businesses are required to register for VAT if they meet either of the following two conditions:

1. At the end of any month, the value of the taxable supplies made in the past 12 months or less has exceeded £90,000 (2023-24: £85,000); or
2. At any time, there are reasonable grounds for believing that the value of taxable supplies to be made in the next 30 days alone will exceed £90,000 (2023-24: £85,000)

Businesses with no physical presence in the UK may also have a liability to be VAT registered in the UK if they supply any goods or services to the UK (or expect to in the next 30 days).

As had been widely expected, the Chancellor announced further changes to National Insurance contributions (NIC) rates for employees and the self-employed.

There will be a further 2% cut in the main rate of Employee National Insurance from 6 April 2024. This will see Class 1 NICs reduced by 2% from 10% to 8%. This is on top of the earlier reduction, announced as part of the Autumn Statement measures, which reduced Class 1 NICs from 12% to 10% on 6 January 2024. When both of these changes are taken together, the Treasury say this will save the average worker on £35,400 over £900 a year.

The Chancellor also announced that the main rate of self-employed National Insurance, Class 4 NICs, on all earnings between £12,570 and £50,270 will be cut by a further 2%, from 8% to 6% from April 2024.

This is in addition to the previous announcement in the Autumn Statement that the current rate of Class 4 NICs would be reduced from the current 9% to 8% from 6 April 2024. Taken together this means that the main rate of Class 4 NICs for the self-employed will now be reduced from 9% to 6% from April. Combined with the previously announced abolition of the requirement to pay Class 2 NICs from 6 April 2024, this will save an average self-employed person making profits of £28,000 approximately £650 NIC a year.

Taken together these cuts mean:

• A hard-working family with two earners on the average salary of £35,400 each will be better off by £1,826.
• An average full-time nurse on £38,900 will be better off by £1,053.
• A senior nurse with five years experience on £42,618 will be better off by £1,202.
• The average police officer on £44,300 will be better off by £1,270.
• A cleaner working night shifts on £21,058 will be better off by £340.
• A typical junior doctor on £65,000 will be better off by £1,508.
• A typical self-employed plumber on £34,361 will be better off by £846.
• The typical teacher on £44,300 will be better off by over £1,270.

As expected, the Chancellor has found wriggle room in his fiscal rules that have allowed him to please his fellow Conservatives by reducing the impact of taxation. Not an unfamiliar tactic for a government in a general election year.

The impact of tax changes announced are summarised below.

Impact on personal finances

Further fall in employee National Insurance contributions (NIC)

As expected, the Chancellor has found headroom to make a further reduction of 2 percentage points, from 10% reduced to 8%, effective from April 2024.

Taken together with the previous 2% drop following the Autumn Statement, this represents a reduction in this tax charge by one-third. It means that a person earning £35,400 will be more than £900 a year better off.

High Income Child Benefit Charge (HICBC)

From 6 April 2024, the income threshold at which the HICBC can recover Child Benefits from parents is being increased from £50,000 to £60,000. The band of income that will affect the amount of any HICBC clawback is also doubled, from £60,000 to £80,000.

From April 2024, Child Benefits will be subject to the HICBC at a rate of 1% of benefits received for every £200 the highest paid parent exceeds £200. This means that when the highest paid earner’s income exceeds £80,000, all Child Benefits will be recovered.

For new Child Benefit claims made after 6 April 2024, any backdated payment will be treated for HICBC purposes as if the entitlement fell in the 2024-25 tax year if backdating would otherwise create a HICBC liability in the 2023-24 tax year.

Capital Gains Tax (CGT) on UK residential property sales

The higher rate of CGT for residential property gains is being reduced from 28% to 24%. The change will take 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 18% and 28% rates of CGT that apply to gains in respect of carried interest remain unchanged from 6 April 2024. These rates previously mirrored those for CGT on disposals of residential property.

Restriction in scope of Agricultural Property Relief and Woodlands Relief

The scope of Agricultural Property Relief and Woodlands Relief will be restricted to property in the UK. Property located in the European Economic Area (EEA), the Channel Islands and the Isle of Man will be treated the same as other property located outside the UK. The changes will take effect from 6 April 2024.

Stamp Duty Land Tax – Multiple Dwellings Relief (MDR)

The MDR is being abolished. This change will come into effect for transactions with an effective date on or after 1 June 2024. Transitional rules mean that MDR can still be claimed for contracts which are exchanged on or before 6 March 2024, regardless of when completion takes place. This is subject to various exclusions, for example that there is no variation of the contract after that date.

Changes to Non-UK Domiciled tax rules

The government will abolish the remittance basis of taxation for non-UK domiciled individuals and replace it with a simpler residence-based regime, which will take effect from 6 April 2025. Individuals who opt into the regime will not pay UK tax on foreign income and gains for the first four years of tax residence.

Overseas Workday Relief (OWR) will be reformed with eligibility for the relief based on the new regime. OWR will continue to provide Income Tax relief for earnings from duties conducted overseas for the first three years of tax residence with restrictions on remitting these earnings removed.

The government has also announced an intention to move to a residence-based regime for Inheritance Tax, with plans to publish a policy consultation on these changes, followed by draft legislation for a technical legislation, later in the year.

A new ISA

A new British ISA with its own allowance of £5,000 a year is to be introduced for investments in UK equity. Further details of the new scheme will be released later this year. 

Flat lining Income Tax rates and allowances

One area of personal tax that was not eased in the Budget announcements was the fiscal drag created by the freezing of the Income Tax personal Allowance and High Income Threshold.

The Income Tax Personal Allowance (presently £12,570) and the higher rate threshold (presently £50,270) above which you will pay Income Tax at 40% not 20%, have not seen a significant increase for over four years.

In the same period, the Consumer Prices Index (CPI) has increased from 108 to 132. To keep pace with inflation, based on the CPI increase, a £45,000 salary in April 2020 would now need to be £55,000 to maintain the same purchasing power. And as the higher rate threshold has remained unchanged, at £50,270, the top £4,730 will be taxed at 40% not 20%.

Based on the CPI change, the present Personal Allowance should be circa £15,400 and the Higher Rate threshold £61,400 to maintain their monetary value. 

The Income Tax Personal Allowance and Higher Rate Threshold will remain unchanged and will not be reviewed again until April 2028.

Vaping Products Duty

The government has published a consultation on the detailed design and implementation of the duty, which will close on 29 May 2024. Registration for the duty will open on 1 April 2026 with the duty taking effect from 1 October 2026 alongside a proportionate increase in tobacco duties.

The duty will apply to liquids for use in vaping devices and e-cigarettes at the following rates:

• £1 per 10ml for nicotine free liquids
• £2 per 10ml for liquid containing nicotine at concentrations between 0.1 to 10.9mg per ml
• £3 per 10ml for liquids containing nicotine at concentrations 11mg per ml, or above

The government will also make a one-off tobacco duty increase of £2 per 100 cigarettes or 50 grams of tobacco from 1 October 2026.

Alcohol Duties

These duties will be frozen from 1 August 2024 until 1 February 2025. This extends the present six-month freeze announced last year.

Fuel Duty main rates

The rates of Fuel Duty introduced at Spring Statement in March 2022, and extended at Spring Budget in March 2023, will be extended for a further 12 months.

This will maintain the cut in the rates for heavy oil (diesel and kerosene), unleaded petrol, and light oil by 5 pence per litre, and the proportionate percentage cut (equivalent to 5 pence per litre from the main Fuel Duty rate of 57.95 pence per litre) in other lower rates and the rates for rebated fuels, where practical.

The changes will take effect from 23 March 2024.

Impact on UK businesses

VAT registration threshold increase

The taxable turnover threshold which determines whether a person must be registered for VAT, will be increased from £85,000 to £90,000. The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £83,000 to £88,000.

These changes will be effective from 1 April 2024. 

This will benefit smaller traders who are tiptoeing towards the present registration threshold of £85,000 and really don’t want to register as they will not be able to pass on the 20% VAT to their customers.

NIC cuts for the self-employed

The Chancellor has made a further reduction in the Class 4 NIC paid by the self-employed. The further cut will be a reduction from 8% of chargeable profits to 6%. Essentially, the overall reduction will be from 9% to 6% effective from 6 April 2024.

No change in Corporation Tax (CT) rates

For the financial year beginning 1 April 2025, the rates of CT will remain unchanged. The main rate will stay at 25% with the reduced small profits rate at 19%.

Abolition of the Furnished Holiday Lets (FHL) tax regime

In a surprise announcement, the present favourable tax benefits of letting properties as short-term holiday lets is to be abolished from April 2025.

Draft legislation will be published at a future date and will include an anti-forestalling rule. This will prevent the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains relief under the current FHL rules. This rule will apply from 6 March 2024.

Full expensing to be extended to leased assets

At present, full-expensing of plant or machinery for leasing is excluded from a claim under the full-expensing or the 50% first year allowance for special rate assets.

The government will shortly publish draft legislation to bring leased assets into these reliefs.

Support for independent film makers

This relief will benefit independent filmmakers and will be provided via the Audio-Visual Expenditure Credit.

The Independent Film Tax Credit is aimed at films that have budgets (or total core expenditure) of up to £15 million and that receive a new accreditation from the British Film Institute. The credit rate will be 53% of qualifying expenditure. Qualifying expenditure is capped at a maximum of 80% of a film’s total core expenditure; the most taxable credit a film can receive will be £6.36 million.

The changes will take effect for films that commence principal photography from 1 April 2024 on expenditure incurred from 1 April 2024. Claims may be submitted from 1 April 2025.

Permanent extension for higher rates of Theatre, Orchestra and Museums and Galleries Tax Reliefs

This change affects the permanent extension of 40%/45% (for non-touring/touring and orchestral productions respectively) headline rates of relief for Theatre Tax Relief, Orchestra Relief, and Museums and Galleries Exhibition Tax Relief. These rates will take effect from 1 April 2025.

Energy Profits Levy — One Year Extension

As announced at Spring Budget 2024, the government will extend the sunset end date of the Energy Profits Levy to 31 March 2029. This is expected to raise a further £1.5 billion for the Treasury.

OUR SUMMARY

There are no radical changes in this Budget from a tax point of view although the Chancellor seems to have abolished as much as he has created in new regulations.

The Chancellor’s Budget speech to parliament was also peppered with much point scoring against the opposition parties. We will have to wait and see if the contents of the Budget provide a big enough rise in polling to prompt the Prime Minister to plump for a May general election. 

The first measures under the Economic Crime and Corporate Transparency Act 2023 (ECCT Act) came into force on Monday 4 March 2024.

Changes introduced include:

• greater powers to query information and request supporting evidence;
• stronger checks on company names; 
• new rules for registered office addresses (all companies must have an appropriate address at all times – they will not be able to use a PO Box as their registered office address); 
• a requirement for all companies to supply a registered email address;
• a requirement for subscribers to confirm they’re forming a company for a lawful purpose when they incorporate, and for a company to confirm its intended future activities will be lawful on its confirmation statement;
• greater powers to tackle and remove factually inaccurate information; and
• the ability to share data with other government departments and law enforcement agencies.

New criminal offences and civil penalties will complement the measures introduced.

The phased roll out of new powers and requirements is designed to minimise hassle for legitimate businesses. Many of the changes will be integrated into existing reporting cycles, such as the requirement to update a company’s confirmation statement.

As further measures are introduced, Companies House will let people who file information with Companies House know what they need to do via their communications channels and campaigns.

The Chancellor announced pension fund reforms as a further step in the government’s plan to boost British business and increase returns for savers. This includes requirements for Defined Contribution (DC) pension funds to publicly disclosure their level of investment in the UK.

Under the plans:  

• By 2027 DC pension funds across the market will disclose their levels of investment in British businesses, as well as their costs and net investment returns. 
• Pension funds will be required to publicly compare their performance data against competitor schemes, including at least two schemes managing at least £10 billion in assets. 
• Schemes performing poorly for savers won’t be allowed to take on new business from employers, with The Pensions Regulator (TPR) and Financial Conduct Authority (FCA) having a full range of intervention powers. 

The plans are subject to a consultation by the FCA and build on the Government’s Mansion House compact, that encouraged pension funds to invest at least 5% of their assets in unlisted equity. 

The furnished holiday let (FHL) rules allow holiday lettings of properties that meet certain conditions to be treated as a trade for tax purposes.

In order to qualify as a furnished holiday letting, the following criteria need to be met:

• The property must be let on a commercial basis with a view to the realisation of profits. Second homes or properties that are only let occasionally or to family and friends do not qualify.
• The property must be located in the UK, or in a country within the EEA.
• The property must be furnished. This means that there must be sufficient furniture provided for normal occupation and your visitors must be entitled to use the furniture.

In addition, the property must pass the following three occupancy conditions.

1. Pattern of occupation condition. The property must not be used for more than 155 days for longer term occupation (i.e. a continuous period of more than 31 days).
2. The availability condition. The property must be available for commercial letting at commercial rates for at least 210 days per year.
3. The letting condition. The property must be let for at least 105 days per year and homeowners should be able to demonstrate the income from these lettings. 

Where there are a number of furnished holiday lettings properties in a business, it is possible to average the days of lettings for the purposes of qualifying for the 105 days threshold. This is called an averaging election.

HMRC provides the following illustrative example:

Emma lets 4 UK holiday cottages for the following number of days in a tax year:

If Emma uses averaging, all 4 cottages will meet the letting condition (421 days divided by 4 = 105). Without averaging, cottage 4 would not qualify.

You can only average across properties in a single FHL business. You cannot mix UK and EEA FHL properties.

It is not unusual for taxpayers to find themselves in a position where they disagree with a tax decision issued by HMRC. There are a number of different options open to taxpayers seeking to use the review and appeals process.

Note, that there is a separate procedure to be followed by taxpayers that make a complaint about HMRC for issues such as unreasonable delays, mistakes and poor treatment by HMRC’s staff.

It may be possible to make an appeal against a tax decision. You can appeal to HMRC against a penalty, for example for:

• an inaccurate return
• sending in your tax return late
• paying tax late
• failing to keep adequate records

There is normally a 30-day deadline for making a claim, so time is of the essence. HMRC will then conduct a review, by using HMRC officers that were not involved in the original decision. A response to an appeal is usually made within 45 days but can take longer for complex issues.

If the taxpayers do not agree with HMRC’s review, there are further options available which include making an appeal to the tax tribunal or using the Alternative Dispute Resolution (ADR) process. The ADR uses independent HMRC facilitators to help resolve disputes between HMRC and the taxpayer.

If a company has stopped trading and has no other income, then the company is usually classed as dormant for Corporation Tax purposes. 

A company is usually dormant for Corporation Tax if it:

• has stopped trading and has no other income, for example investments;
• is a new limited company that hasn’t started trading;
• is an unincorporated association or club owing less than £100 Corporation Tax; or
• is a flat management company.

There is a special online form that can be used to advise HMRC if a company is dormant. The form can be found at www.gov.uk/tell-hmrc-your-company-is-dormant-for-corporation-tax. In order to complete the form, you will need the company’s name, 10-digit Unique Taxpayer Reference (UTR) and the date the company ceased trading. It is also possible to notify HMRC by phone or by post if the online option is not available.

HMRC can also send a notification if they think a company is dormant. This notice will state that a company or association is dormant and is not required to pay Corporation Tax or file Company Tax Returns.

Limited companies are still required to file annual accounts and a confirmation statement even if the company is dormant for Corporation Tax purposes.

A company can stay dormant indefinitely, however, there are costs associated with this option. This might apply if a company is restructuring its operations or wants to retain use of a company name, brand or trademark. 

The Construction Industry Scheme (CIS) is a set of special rules for tax and National Insurance for those working in the construction industry. Businesses in the construction industry are known as 'contractors' and 'subcontractors' and should be aware of the tax implications of the scheme.

Under the scheme, contractors are required to deduct money from a subcontractor’s payments and pass it to HMRC. The deductions count as advance payments towards the subcontractor’s tax and National Insurance. Contractors are defined as those who pay subcontractors for construction work or who spent more than £3m on construction a year in the 12 months since they made their first payment. A contractor can be a sole trader, in a partnership or own a limited company.

New contractors must follow these rules:

1. They must register for CIS before they take on their first subcontractor.
2. They must check if they should employ the person instead of subcontracting the work. They may get a penalty if they should be an employee.
3. Check with HM Revenue and Customs (HMRC) that their subcontractors are registered with CIS.
4. When they pay subcontractors, they will usually need to make deductions from their payments and pay the money to HMRC. Deductions count as advance payments towards the subcontractor’s tax and National Insurance bill.
5. They need to file monthly returns and keep full CIS records – they may get a penalty if they do not.
6. They must let HMRC know about any changes to their business.

Companies House has announced that some of their fees will be changing from 1 May 2024. The last change in fees was April 2016. 

The fees have been calculated on a ‘cost recovery’ basis meaning that the fees are calculated based on what it costs to provide the services in question. Companies House state that they do not make a profit on their fees. 

As The Economic Crime and Corporate Transparency (ECCT) Bill has moved through Parliament, concerns had been raised on the current fee structure. Companies House say that these changes to the fees charged will ensure adequate funding going forward to recover costs incurred as well as to help fund the cost of the new powers introduced as part of the ECCT Bill. 

Prices shown below are some of the main changes from 1 May 2024: 

The full list of changes can be found here:
https://changestoukcompanylaw.campaign.gov.uk/changes-to-companies-house-fees/

HMRC have reversed a previous decision (originally published 12 February 2024) on the tax status of Double Cab Pick Ups (DCPUs), following an earlier 2020 Court of Appeal judgment. The earlier decision, now reversed, had announced that effective from 1 July 2024, DCPUs with a payload of one tonne or more would be treated as cars rather than goods vehicles for both capital allowances and benefit-in-kind purposes.

The February announcement caused a significant backlash from farmers and the motoring industry on the potential impacts of the change in tax-treatment. In their surprising U-turn, just over one week after the initial announcement, the government has now retracted its decision to class DCPUs as cars. This move will ensure that businesses and individuals can continue to benefit from the historic tax treatment of DCPUs.

The Financial Secretary to the Treasury, said:

“We will change the law at the next available Finance Bill in order to avoid tax outcomes that could inadvertently harm farmers, van drivers and the UK’s economy.”

DCPUs with a payload of less than one tonne will continue to be classed as cars as has historically been the case.

An experienced entrepreneur has taken up a key role to promote the needs of small businesses to government and ensure suppliers seize the benefits of the Procurement Act.

Shirley Cooper OBE, former chair and president of the Chartered Institute of Procurement and Supply, met Parliamentary Secretary Alex Burghart for the first time as Crown Representative for small businesses earlier this month. 

They discussed priorities for the next 12 months, with a focus on the implementation of the Procurement Act in October, which will see further benefits for start-ups and small businesses wishing to work with the government. These include simpler processes, greater transparency and access to opportunities, as well as strengthened payment terms which will maximise value for money and innovation in the government market.

Ms Cooper will lead on the overall relationship between the government and small businesses, making sure the government gets best value from small and medium-sized enterprises (SMEs), and that they in turn have the best possible opportunity to work with the government.

Shirley Cooper OBE said:

"I am delighted to take up this role and build on the work of my predecessor, Martin Traynor.

I look forward to working with colleagues across Government to make sure small businesses can seize the fantastic opportunities available to them in the public procurement process.” 

She will build on the work of Martin Traynor OBE, who is retiring after a five-year tenure in the post which culminated in the reforms of the Procurement Act 2023. 

Ms Cooper will also support the commitment to, and delivery of, increasing central government spend on SMEs. This spend has risen every year since 2016/17 and stood at a record £21.0 billion worth of work in 2021/2022. The Government spends around £300 billion every year on procurement.

She will be an advocate for small businesses, promoting their agenda both in government and externally.