The Chancellor today delivered his Budget Statement, promising to help families with permanent tax cuts and to boost growth. Following speculation of last-minute tax cuts the Chancellor made a number of announcements, both abolishing reliefs and reducing taxes.

The main announcements include:

Non domicile status

Non-domicile status is to be abolished with effect from April 2025. It will be replaced with a residency-based system which will mean that new arrivals to the UK will not pay tax on their foreign income and gains during their first four tax years of residency, provided they have been non-UK resident for the previous ten tax years. Eligible employees will also be able to claim overseas workdays relief in their first three tax years of residency, which provides UK tax relief in respect of employment income received in respect of overseas duties.

Transitional arrangements for current UK resident non-UK domiciled individuals will apply, including a two-year repatriation facility to allow previously accrued income and gains to be remitted to the UK at a flat 12% tax rate. If the remittance basis has been claimed and the individual is neither legally nor deemed UK domiciled by 5 April 2025, there will be an option to re-base the value of capital assets owned personally to their value on 5 April 2019. For individuals who lose access to the remittance basis under the old regime and are not eligible for the benefit of new 4-year regime, there will also be a temporary 50% exemption on the taxation of foreign income in the first tax year of the new regime (2025/26).

Trust protections are to be abolished and the intention is to tax settlors on both UK and foreign trust income and gains that arise from 6 April 2025 (unless the new four-year regime applies), with no further tax on distributions made by the trustees.

Abolition of the non-domicile status is estimated to raise £9.4bn by 2028/29. Draft legislation is to be published for consultation.

National insurance rates

Echoing announcements made in the Autumn Statement, the government is again cutting the main rate of Class 1 employee National Insurance Contributions (“NICs”) further from 10% to 8%, from 6 April 2024. The reduction will mean the average worker receives a tax cut of over £450 per year from April 2024.

The main rate of self-employed class 4 NICs will also be cut further to 6% from 6 April. The combined cost of national insurance reductions announced today is forecast to be £10.1bn per year from 2024/25 rising to £10.8bn in 2028/29.

Residential Property Taxation

The Chancellor announced a package of reforms to the taxation of residential property, aimed at making the system fairer and more efficient, while boosting capital gains tax revenue. The measures are forecast to raise over £600 million in 2028/29.

Furnished Holiday Lettings Relief will be abolished from 6 April 2025 to level the playing field between short-term and long-term lets.

In order to encourage landlord and second homeowners to sell their properties the higher rate of Capital Gains Tax on residential properties will be reduced from 28% to 24% from 6 April 2024. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band.

The Stamp Duty Land Tax (“SDLT”) Multiple Dwellings Relief, which taxpayers can elect to apply where they purchase more than one dwelling in a single transaction, so that the average dwelling price is used to determine the applicable residential SDLT rate, is to be abolished from 1 June 2024. This follows a government commissioned external evaluation which showed no strong evidence the relief is meeting its original objectives of supporting investment in the private rented sector. Property transactions with contracts that were exchanged on or before 6 March 2024 will continue to benefit from the relief regardless of when they complete, as will other purchases that are completed before 1 June 2024. There is no change to the rule that purchases of 6 or more dwellings are treated as the acquisition of non-residential property (so that the higher residential SDLT rates do not apply).

Creative sector reliefs

A plethora of measures for the creative sector were announced, including an enhanced 53% tax credit on qualifying film production expenditure. This enhanced Audio-Visual Expenditure Credit will be available for films with production budgets under £15 million that meet the requirements of a new British Film Institute test. Productions can make claims from 1 April 2025 in respect of expenditure incurred from 1 April 2024 onwards, provided that the film started principal photography from 1 April 2024.

Separately, there will also be an increase to the rate of tax credit applicable to UK visual effects costs in film and high-end TV to 39% from April 2025. The 80% cap will be removed for qualifying expenditure comprising UK visual effects costs.

A 40% reduction in gross business rates bills until 2034 will be available for eligible film studios in England. The relief will be available as soon as possible, with bills back dated to 1 April 2024.

The temporary uplift in relief for Theatre, Orchestra and Museums, Galleries and Exhibitions relief to 40%/45% was also made a permanent measure.

The combined cost of the creative sector measures announced is estimated to be over £1bn to 2028/29.

VAT thresholds and excise duty

 The VAT threshold will increase from £85,000 to £90,000 from 1 April 2024, the first threshold increase in seven years.

A number of announcements were also made to excise duties, including freezing fuel duty for a 14th consecutive year, extending the alcohol duty freeze until February 2025, and introducing a duty on vaping products from October 2026. A new UK-wide duty on e-liquids used for vaping will be introduced, comprised of three rates for nicotine-free, nicotine (<11mg/ml), and nicotine high (>11mg/ml). These will be set at £1, £2, and £3 per 10ml of liquid respectively.

Taxation of Energy Companies

The government is extending the Energy Profits Levy (EPL) by an additional year until March 2029, raising £1.5 billion. However, to reiterate that the EPL is a temporary measure introduced in response to energy price rises the government will include legislation in the Spring Finance Bill to disapply the levy when prices fall below the levels set by the Energy Security Investment Mechanism.

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