Budget 2024: National Insurance cut again and non-dom regime spiked

Chancellor of the Exchequer Jeremy Hunt delivered a Spring Budget that was high on tinkering but low on radical moves.

In his “Budget for long-term growth”, Hunt noted the government had met its pledge to halve inflation – which had been 11 per cent when Hunt became Chancellor in October 2022 – adding that the latest inflation figure of 4 per cent “did not happen by accident”.

Before the November 2023 Autumn Statement, Hunt said he wanted to cut inflation before taxes – and yesterday announced that the government would further cut taxes, “because Conservatives know that lower taxes mean higher growth”. 

However, the Institute of Directors (IoD) said it was “an unremarkable Budget” for business. Director of policy Roger Barker said “there was little … that can be regarded as a game-changer”.

Tax Justice UK executive director Robert Palmer called it a “cut and run” Budget designed with “one eye on the election,” saying that the chancellor’s “sugar rush of tax cuts now” would be “paid for by deep public spending cuts to come”. 

Personal tax: NI, child benefit and ISAs

The most eye-catching tax cut was to National Insurance Contributions (NICs) – which had already been cut at the Autumn Statement. From April 2024, the main rate of employees’ NICs falls further from 10 per cent to 8 per cent, while for the self-employed it falls from 8 per cent to 6 per cent. 

While not as impactful as the rumoured reduction to the headline income tax rate, the further fall in NICs “will act as another welcome and almost immediate cut in taxes for the squeezed working population”, noted PwC tax partner Christine Cairns, although she noted that income tax thresholds continued to be frozen despite inflation remaining above the 2 per cent target. 

Shaun Moore, Quilter tax and financial planning expert, said the NIC cut did nothing for pensioners, and that an income tax cut might have had a broader impact on the nation. Moore added that, in terms of garnering support for the Conservatives in an election, the move “may be a case of too little, too late”. 

HMRC will be collecting household income information to reform how child benefit is treated in the tax system by April 2026. The High-Income Child Benefit Charge (HICBC) threshold will rise from £50,000 to £60,000, and the top of the taper at which child benefit is withdrawn will rise to £80,000. Laura Suter, AJ Bell director of personal finance, said the decision “is a big boost to higher-rate taxpayer parents”, but questioned if it was “time to dismantle the child benefit system” and rebuild it with a less complicated, more common-sense approach that works for families.

Individual Savings Accounts (ISAs) also saw some reform. A new ‘British ISA’ will allow an additional £5,000 annual investment for investments in UK equities on top of the current £20,000 ISA allowance. 

Non-domiciled taxation 

Hunt announced the abolition of the current tax system for non-domiciled individuals, removing what he described as “the outdated concept of domicile” and the remittance basis. From April 2025, new arrivals to the UK will not be required to pay any tax on foreign income and gains for the first four years – but those who continue to live in the UK after four years will pay the same tax as other UK residents. 

A transitional period will be in place for those currently benefiting from the ‘non-dom’ regime. A two-year period will run in which individuals will be encouraged to bring wealth earned overseas to the UK where it can be spent and invested. This measure will generate more than £1 billion of extra UK tax, and abolishing non-dom status will raise £2.7 billion a year by the end of the forecast period. 

Rachael Griffin, Quilter tax and financial planning expert, said it was a “bold move” that upstaged the Labour Party’s plans on non-dom taxation. Griffin noted it “diverges” from Tory fiscal policy and also marks a “big shift” in how the UK approaches taxation and residency.

Property taxes

The higher rate of capital gains tax (CGT) on property was cut from 28 per cent to 24 per cent. Justin Corliss, technical manager at Royal London, said this will be welcomed by those affected. However, with no change to the scheduled reduction in the CGT exempt amount from £6,000 to £3,000 from 6 April 2024, “the impact of [the higher rate cut] will be somewhat diluted”, he added.

Stamp duty land tax relief will be abolished from 1 June 2024 for multiple dwellings (i.e. two or more) purchased in a single transaction. 

The furnished holiday lettings tax regime will also be removed. Hunt said this was due to concern that it creates “a distortion”, meaning that there are not enough properties available for long term rental by local people. Shaun Moore said the move might prove “deeply unpopular amongst some core Tory voters”, but said aligning the tax treatment of holiday lets with that other rental properties could raise a reported additional £300 million a year.

Business taxes

Federation of Small Businesses (FSB) policy chair Tina McKenzie welcomed the increase in the VAT registration threshold from £85,000 to £90,000 from 1 April 2024. However, Michelle Dale, VAT director at UHY Hacker Young, said the raise should have been higher to encourage more growth, adding: “Many small businesses are thought to avoid growing their turnover so that they don’t have to bother with the complexity of VAT.” 

Tina McKenzie said the FSB is pleased to see help for theatres and productions, and that fuel duty was again frozen. As well as the fuel duty freeze, the 5p per litre discount has been extended for a further year. Alcohol duty has also been frozen until February 2025 – a move the chancellor claimed would benefit 38,000 British pubs. 

Hunt confirmed the rates of tax relief for theatre, orchestra, and museums and galleries exhibition will be made permanent – with the non-touring and touring rate, and the orchestral rate set at 40 per cent and 45 per cent respectively from 1 April 2025. The sunset clause for museums and galleries exhibition tax relief has been removed.

There is more tax relief for visual effects in film and high-end television, with a 5 per cent increase to the rate of tax credit and the removal of the 80 per cent cap for visual effects costs in the Audio-Visual Expenditure Credit. 

The chancellor also announced eligible film studios in England would have 40 per cent relief on their gross business rates until 2034, and a new tax credit for UK independent films with a budget of less than £15 million would be introduced. 

The oil and gas Energy Profits Levy will be extended to 31 March 2029, which PwC partner Colin Smith forecast would raise an extra £355 million and would “disappoint” the sector.

“From an immediate practical perspective, oil and gas groups that have not yet released their 2023 year-end results may have to provide an estimate of the impact of the [levy] extension,” he said. Smith also noted the Energy Security Investment Mechanism, which would “turn off” the levy if prices fall below $71.40 per barrel of oil and £0.54 per therm of gas, will be included in this year’s Finance Bill.