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The headliner for this budget was the 2p cut in National Insurance Contributions, however this is less generous than it might appear. 

Income tax and national insurance thresholds remain frozen until 2028

For some the personal tax allowance being frozen, combined with fiscal drag caused by inflation, will offset the cuts to National Insurance Contributions.  This is because more income will be subject to income tax, with more people paying tax and more people falling into higher tax bands.

The National Insurance cut was to employee contributions only, which many businesses will find disappointing.

The main rate of Class 1 employee NICs will reduce from 10% to 8% from‌‌‌ ‌‌6‌‌‌ ‌‌April 2024, and the main rate of Class 4 self-employed NICs from 6‌‌‌ April‌‌‌ 2024 to 6% from 9%.

High Income Child Benefit Charge

The income threshold will increase from £50,000 to £60,000 from 6‌‌‌ April‌‌‌ 2024, with the taper being extended to £80,000.

This means that you won’t have to pay any of your Child Benefit back until you start earning £60,000 a year, and you’ll only lose the benefit entirely if you earn above £80,000.

Value Added Tax (VAT)

The VAT threshold will increase to £90,000 from 1‌‌‌ April‌‌‌ 2024, and the level at which a business can apply for de-registration will increase from £83,000 up to £88,000

Holiday Lets

Tax relief on furnished holiday lets will be scrapped, with the abolition of the Furnished Holiday Lettings (FHL) tax regime, to take effect from April 2025.

This will eliminate the tax advantage for landlords who let out short-term furnished holiday properties over those who let out residential properties to longer-term tenants.  The aim is to improve year-round housing stock in high-tourism areas.

The current regime treats the Holiday Letting as a trade and allows tax benefits not available to residential landlords.  Under the Furnished Holiday Lettings tax regime landlords can deduct the full cost of their mortgage interest payments from their rental income and are entitled to capital allowances on the furniture provided.  Also as the property is classed as a business asset they pay lower capital gains tax (CGT) when they sell the property and are entitled to CGT rollover relief.

The changes proposed represent an element of simplification, by aligning the tax treatment of landlords irrespective of short term or longer term lets, however, it will undoubtedly be an unwelcome shock for many.

These changes will take effect from 6 April 2025 for Income Tax and Capital Gains Tax and 1 April 2025  for Corporation Tax.

The higher CGT rate for residential property disposals will reduce from 28% to 24%. The change will take effect for disposals that take place on or after 6‌‌‌ April 2024. The lower rate of Capital Gains Tax of 18% will remain unchanged.

As always, should you have any questions we would be pleased to hear from you.

Koreen can be contacted on 07531741287 and her e-mail address is koreen@synergyaccounting.co.uk