March 2024 Budget Summary from Butt Miller Chartered Accountants

March 2024 budget summary from butt miller chartered accountants
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    Disclaimer: This article is based on legislation which was correct at time of publishing on March 7, 2024

    March 2024 Budget Overview and National Insurance Cut

    With a General Election on the horizon you could be forgiven for thinking that this Budget would be a giveaway but, apart from the further cut in the National Insurance rates for workers, little happened of note on the taxing front beyond addressing a few issues that are perceived as unfair.

    “Full expensing” was again pushed as a flagship initiative, but for the vast majority of businesses the Annual Investment Allowance, which currently fully relieves £1 Million of capital expenditure in the year the cost is incurred, is more than adequate, so that the full expensing is really only relevant to the very largest of businesses.

    National Insurance Cut and Dividend Considerations

    Off the back of the 2019 promise to reduce basic rate tax to 19% there had been an expectation that it would happen now, but what we got was a further 2% cut in National Insurance. Whilst this of course benefits employees and businesses operating outside of company structures, it does not help pensioners and those deriving their income from dividends.

    However, for most director/shareholders it is still looking like dividends are cheaper overall than taking salary, even with the reduction in personal National Insurance and the increase in Corporation Tax. Employer National Insurance remains high which has a significant impact on this equation.

    Impact on Self-Employed and VAT Threshold Increase

    The reduction in National Insurance for the self employed makes incorporation even less attractive at this point, unless the profits generated exceed the individual’s spending needs. Operating through a limited company is of course about more than just tax savings.

    Having been stuck at £85,000 for 7 years the threshold for VAT had been targeted as stifling business growth for some time, so the increase in the threshold was kind of expected, but the £5,000 uplift is hardly likely to stimulate much heat in the small business sector. Time will tell.

    Tax Adjustments for Landlords and Furnished Holiday Lets

    Landlords received good news in that the rate of tax they can expect to pay on selling investment properties dropped by 4% to 24%, applying to sales that are agreed after 5 April 2024. The lower rate of capital gains tax on properties remains at 18%. On the other hand, those renting to the holiday market may be negatively impacted by the tax breaks for furnished holiday lets being abolished. The benefits of the scheme had been significantly eroded over time but for those that take advantage of full interest relief, capital allowances and the ability to fund pensions from the profits, the move will be very disappointing. The press release is silent on transitioning from the current scheme. Hopefully more information will be made available in due course.

    Child Benefit Claw Back and Funded Childcare Scheme

    The claw back of child benefit for “higher income” families was introduced in 2013 and has caused no end of problems for families on the wrong side of an income threshold which has never changed. The temporary increase from £50,000 to £60,000 for the threshold and halving the steep rate of claw back is welcome, but the inequity of dual income households with much higher income being significantly better off than those with only one income remains. The proposal is to move to a claw back based on household income from 2026, but this will inevitably bring its own problems.

    The same inequity is baked into the new funded childcare scheme which comes in from next month, with an added sting in the tail as there is no phased claw back of the funding. Where the parent(s) earn less than £100,000 each up to 30 hours free childcare is available, depending on the child’s age, but all of the funding is lost if income is £100,001 or more. This Budget included a promise to reassess the cliff edge effect of this threshold, but that is not going to help young families for the 2024-25 tax year.

    UK ISA Scheme Announcement and Consultation

    Although a new UK ISA scheme was announced, which will allow an additional £5,000 a year to be invested into schemes that invest only in UK companies, it turns out that the government is consulting on the scheme design until June 2024, implying that it could be some time before these are available on the high street.

    As we always say, the devil is in the detail with the Budget and we don’t yet know the fine print for most of the changes. If you think you are affected by any of the announcements, please do call us with any questions you may have.

    We will of course be happy to help with any questions you may have, please do contact us.

    Paula Sparrow. Tax Director

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