On March 6, 2024, the UK Chancellor of the Exchequer, Mr. Jeremy Hunt, presented the Spring Statement before the UK Parliament. He announced that the UK economy grew at 0.8% during the year 2023-24 and is expected to grow at 1.9% in the following year. Inflation rate is expected to fall to the target rate of 2% in Q2 of 2024 that is, a year earlier than expected.
The following are the highlights of the proposals presented in the Spring Statement.
For individuals and employers
- National Insurance Contributions (NICs):
- The Autumn statement had reduced the Employee’s Class 1 NIC main rate from 12% to 10%. From January 6, 2024. the Spring Budget further reduces it from 10% to 8%. No reduction is proposed in employer’s NI contribution. The Chancellor announced that this brings average personal taxes to the lowest level since 1975.
The following table summarizes the changes:
| Timeline | Rates for Employer | Main rates for Employee (below Upper Earnings Limit) | Additional rate for Employee (above Upper Earnings Limit) |
| Prior to January 6, 2024 | 13.80% | 12% | 2% |
| Effective from January 6, 2024 (announced in Autumn statement) | 13.80% | 10% | 2% |
| Effective from April 6, 2024 (announcement in Spring statement) | 13.80% | 8% | 2% |
Various ceilings and limits for applicability of NIC remain unchanged.
- Self-employed individuals are required to pay Class 2 and Class 4 NIC. The Spring Statement announces cut in Class 4 NIC rates for self- employed from 8% to 6% effective from April 6, 2024.
- It is also proposed to abolish the tax rules for non-UK domiciled individuals, (known as “non-doms”) which will be replaced with a residence-based regime from April 6, 2025. Under the new regime, the individuals will not pay tax on their foreign income for the first 4 years of their residence in the UK provided they have been non-tax resident for the earlier 10 years. However, once they are tax-resident in the UK for more than 4 years, they will pay UK tax on their foreign income and gains, similar to the other UK residents. It is also proposed to introduce a transitional arrangement for the existing non-doms.
- The child benefit is provided to support families to pay the cost associated with having children. Further, High Income Child benefit charge (HICBC) is payable if one of the parents have income above GBP 50,000. It is proposed that HICBC will be administered on a household basis rather than an individual basis by April 2026 and the threshold for its applicability will be increased from GBP 50,000 to GBP 60,000 from April 2024. Thus, HICBC will apply at 1% of the full Child Benefit award for each GBP 200 of adjusted net income between GBP 60,000 and GBP 80,000, halving the rate at which HICBC is charged. The charge on taxpayers with income above GBP 80,000 will be equal to the full amount of Child Benefit paid.
- The higher rate of capital gains tax for residential property disposals will be cut from 28% to 24% from April 2024. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band.
For businesses and others
- To support small and medium enterprises, it is proposed to increase to VAT registration threshold from GBP 85,000 to GBP 90,000 from April 1, 2024. Further the deregistration threshold will increase from GBP 83,000 to GBP 88,000.
- The Energy Profits Levy was introduced in 2022 whereby the oil and gas producers in the UK were required to pay tax on their extraordinary profits. Gas prices are forecast to remain abnormally high until at least 2028-29. Therefore, it is proposed to extend the Energy Profits Levy by an additional year to 2028-29.
- The Spring Statement also announces certain measures, incentives, and relief to specific industries like creative industry, green industry, life sciences, etc.
Other proposals
- It is proposed to maintain the rates of fuel duty at the current levels for a further 12 months. Thus, the temporary 5 pence cut in fuel duty is extended for another 12 months cancelling the planned inflation-linked increase for 2024-25.
- It is proposed that a new duty will be introduced on vaping products from October 2026 to discourage non-smokers from taking up vaping. A vape, or an electronic cigarette, is a device which simulates tobacco smoking. Further there will be a one-off increase in duty on tobacco products to maintain the current financial incentive to choose vaping over smoking.
- Air Passenger Duty (APD) rates will increase for premium economy, business, first class and private jet passengers from 2025-26.
Implications
Employers should take note of revision in NIC rates and adjust their payroll procedure accordingly. Businesses proposing to start operations in UK should take note of the revised VAT registration thresholds. Individuals relocating to UK should evaluate the impact of new residence based regime which is being introduced in place of tax rules for non-UK domiciled individuals.
©Shan & Co. 2024