This Summary covers the key tax changes announced in the Chancellor’s speech
and includes tables of the main rates and allowances.
At the back of the Summary you will find a calendar of the tax year with important
deadline dates shown.
We recommend that you review your financial plans regularly as some aspects
of the Budget will not be implemented until later dates.
We will, of course, be happy to discuss with you any of the points covered in
this report and help you adapt and reassess your plans in the light of any
legislative changes.
Surprise – no surprises!
In past years, the annual Budget was shrouded in secrecy. No one
was supposed to know what was in the Red Box that the Chancellor
held up outside 11 Downing Street on his way to Parliament.
There was an element of suspense. Now it seems that most of the
proposals were predicted in the morning papers – the television
pundits were reduced to speculating whether Jeremy Hunt would
produce ‘a rabbit from his hat’, but it turned out that the hat only
contained what was expected.
The further reduction in National Insurance Contributions, over and above cuts already
announced in the Autumn Statement, is certainly a significant measure, reducing the
Government’s projected income by £10 billion a year. A reduction in the rate of income tax
would be more expensive to achieve, because it would affect all taxpayers, not just those in
work – but maybe that is a rabbit for another day, closer to the General Election that must
happen within a year.
Raising the threshold for the High Income Child Benefit Charge is welcome – a tax relief
worth over half a billion pounds a year. The changes to the tax regime for foreign domiciled
people will, by contrast, raise a little less than £3 billion a year from 2026/27. The Labour
Party has been arguing for such a change for some time, and may have mixed feelings
over being denied the opportunity to introduce it themselves.
Even though the Chancellor failed to spring any major surprises, there is as always a
great deal of information in the documents that are released on the internet the moment
he sits down. It is also possible to miss the impact of changes that were announced in
previous statements and which are only now coming into effect. In this document we have
summarised the latest proposals and their impact, and also included reminders of some of
those earlier announcements. If you would like to discuss what it all means for you, we will
be happy to help.
Significant points
l Personal tax rates and allowances on income continue to be frozen at current levels
l Further cuts to National Insurance Contributions in addition to those announced in the
Autumn Statement, to take effect in April 2024
l Increase in threshold for High Income Child Benefit Charge from £50,000 to £60,000
for 2024/25
l Maximum rate of CGT on residential property cut from 28% to 24% from 6 April 2024
l Advantageous tax treatment of furnished holiday lets abolished from 6 April 2025
l Advantageous tax treatment of ‘non-doms’ abolished from April 2025 and replaced
with a ‘residence-based’ system
l Increase in turnover threshold for VAT registration to £90,000 from 1 April 2024
Personal Income Tax
Tax rates and allowances – 2024/25 (Table A)
The Autumn Statement included the announcement that the main personal allowance
and the 40% threshold will remain at their 2022/23 levels until the end of 2027/28.
This represents a tax increase where income rises from year to year. For example, a
person with a salary of £50,270 would pay £7,540 in income tax in 2023/24; if their
income increases by 10% to £55,297 in any of the years to 2027/28, all of the increase
will be taxed at 40%, and they will pay £9,551.
The income level above which the personal allowance is tapered away remains
£100,000; it will be reduced to zero when income is £125,140, which is also the
threshold for paying 45% tax. In the tapering band, the loss of tax-free allowance
creates an effective marginal rate of 60%. Once again, annual increases in income will
bring more people into these higher rates.
High Income Child Benefit Charge (HICBC)
The HICBC continues to apply to the higher earner of a couple where one receives
Child Benefit and either of them has income of more than a set threshold. For
2024/25, for the first time since the charge was introduced in 2012/13, the threshold
has been raised from £50,000 to £60,000; the band of income over which the
clawback is calculated has also increased from £10,000 to £20,000 (1% of the total
benefit for every £200 of income), so that the whole benefit is lost when income
reaches £80,000 (£60,000 in 2023/24). The HICBC is one reason that an individual
might have to register for self-assessment and file a tax return.
The Chancellor announced plans to reform the HICBC from April 2026 to take into
account the combined income of the household, rather than just the higher earner.
This will reduce the unfairness of clawing back nothing from a couple each earning
£59,000 (in 2024/25), compared to full clawback where one of the couple earns
£80,000. However, it is not a straightforward change because it will require HMRC to
have the power to consider the income of the couple rather than as two individuals.
Scottish rates and allowances – 2024/25 (Table A)
The Scottish government has the power to set its own income tax rates for Scottish
taxpayers for non-savings, non-dividend income. In its Budget in December 2023,
the following were announced for 2024/25:
l A new ‘advanced’ tax rate of 45%, applying to income between £75,000
and £125,140.
l The top rate of tax, applying to income above £125,140, will be increased to
48% (from 47%).
l The 19% starter, 20% basic, 21% intermediate and 42% higher rates will be
unchanged.
l The starter and basic rate thresholds will be increased by inflation to £14,876
and £26,561 respectively, with the higher rate threshold frozen at £43,662.