The Chancellor’s Spring Statement

Abolition of Multiple Dwellings Relief (MDR) – effective for transactions completing on or after 1 June 2024, or contracts exchanged on or before 6 March 2024

The government announced the abolition of Multiple Dwellings Relief (MDR) for SDLT purposes which applied when an individual purchased one or more dwellings in the same transaction.  MDR will be abolished for transactions which complete on or after 1 June 2024, but purchasers who exchanged contracts on or before 6 March 2024 will still be able to benefit from the relief (regardless of when the contract of sale completes).

First Time Buyers' Relief change – effective from 6 March 2024

Any individuals who purchase new residential leases using nominees or a bare trust arrangement will be able to claim first time buyer's relief.  The change will take effect from 6 March 2024. 

The administrative burden on personal representatives of estates to pay inheritance tax before probate or confirmation has been eased. Personal representatives will no longer be required to have sought commercial loans before applying for a 'grant on credit'. HMRC will now more readily issue the personal representatives with a 'grant on credit' which allows them to postpone all or part of the inheritance tax due until the grant has been issued.

Child benefit can be claimed by individuals responsible for a child under 16 (or under 20 if they are in approved education or training). If claimed, Child Benefit is paid at a weekly rate of £20.70 for the first child and £13.70 for each additional child. Only one person in a couple can claim Child Benefit for a child.

Currently, in a household with two parents, if you receive Child Benefit and either of you has an individual income over £50,000, you will have to pay the High Income Child Benefit Charge which claws back part of the Child Benefit you receive.

The Spring Budget provides that from April 2024, the threshold for which you have to pay the High Income Child Benefit Charge has been raised to £60,000 and the rate of the charge will also be halved. This means that the Child Benefit is not repaid in full until you earn £80,000 and nearly 500,000 families will gain an average of £1,2560 in 2024-25 as a result.

The rate of capital gains tax on disposals of residential property for higher rate taxpayers will be reduced from 28% to 24%, effective from 6 April 2024.  The lower rate will remain at 18% for any gains falling within an individual's basic rate band.

Class 1 NICs

Class 1 NICs are paid by both employees and employers on earnings from employment.

Following the Autumn Budget, employees currently pay Class 1 NICs at a rate of 10% on their earnings between £1,048 and £4,189 per month, however, it has been announced that from 6 April 2024 the rate will be reduced to 8%. This would result in tax cut to employees, an example being that an individual earning £35,400 per year will save £900.

Class 2 and 4 Self-Employed NICs

Class 4 NICs are paid by the self-employed.

It has been announced that the main rate of Class 4 self-employed NICs payable on profits between £12,570 and £50,270 will be cut from 9% to 6% from 6 April 2024. Combined with the abolition of Class 2 NICs in the Autumn Budget, this will save an average self-employed person earning £28,000 around £600 a year.

Further to the announcement in the Spring 2023 Budget, the Finance Bill contains provisions limiting the scope of agricultural property relief and woodlands relief to UK property from 6 April 2024.  This will exclude from relief property located in countries within the European Economic Area, the Channel Islands and Isle of Man. 

The change affects post-6 April 2024 gifts and deaths, but also gifts made before 6 April 2024 if the donor dies after 6 April and within 7 years of the gift.

The government has announced that it will abolish the Furnished Holiday Lettings tax regime from 6 April 2025.  The Furnished Holiday Lettings tax regime currently provides additional tax relief for landlords who let short term furnished holiday lets ("FHLs") compared to landlords who let residential properties to longer-term tenants.

The main advantages under the Furnished Holiday Lettings tax regime are that landlords can claim Capital Gains Tax reliefs (if they are a trader) and plant and machinery capital allowances for items such as furniture, equipment and fixtures. FHL landlords are also able to deduct the full cost of mortgage interest payments from rental income and use the profits from the FHL as earnings for pension purposes.

The government has confirmed that individuals with both FHL and non-FHL properties will no longer need to calculate and report income separately.

Changes are being made to the taxation of non-domiciled individuals.  To date, a foreign individual who comes to the UK and who has assets abroad has been subject to an alternative tax regime which applies to those non-UK assets.  In the first seven years of UK tax residence they have been able to submit a claim to be taxed only on income and capital gains brought to the UK, and in the following eight years they have been able to pay a fee to maintain the remittance basis.  Their estate outside the UK and foreign currency in UK bank accounts has been outside the scope of inheritance tax.

Income and capital gains

For income and capital gains tax, the government proposes introducing the new Foreign Income and Gains regime.  It is summarised by the following extract from HM Treasury's technical papers as follows:

Personal Income and gains

"From 6 April 2025, the current remittance basis of taxation will be abolished for UK resident non-domiciled individuals. This will be replaced from 6 April 2025 with a new 4-year foreign income and gains (FIG) regime for individuals who become UK tax resident after a period of 10 tax years of non-UK residence. Qualifying individuals will not pay tax on FIG arising in the first 4 tax years after becoming UK tax resident and will be able to bring these funds to the UK free from any additional charges. They will not pay tax on non-resident trust distributions either. They will pay tax on UK income and gains, as is the case for non-domiciled individuals now. 

Individuals who on 6 April 2025 have been tax resident in the UK for less than 4 years (after 10 years of non-UK tax residence) will be able to use this new regime for any tax year of UK residence in the remainder of those 4 years. 

Overseas Workday Relief (OWR) for the first 3 tax years of UK residence will be retained and simplified. From 6 April 2025 eligibility for OWR will be based on an employee’s residence and whether they opt to use the new 4-year FIG regime.  

From 6 April 2025, the protection from taxation on future income and gains as it arises within trust structures (whenever established) will be removed for all current non-domiciled and deemed domiciled individuals who do not qualify for the new 4-year FIG regime. FIG arising in non-resident trust structures from 6 April 2025 will be taxed on the settlor or transferor (if they have been UK resident for more than 4 tax years) on the arising basis. This is the same basis on which trust income and gains are taxed on UK domiciled settlors or transferors under the current regime.  FIG which arose in the trust or trust structure before 6 April 2025 will be taxed on settlors or beneficiaries if they are matched to worldwide trust distributions. 

Individuals who move from the remittance basis to the arising basis on 6 April 2025 and are not eligible for the new 4-year FIG regime will, for 2025-2026 only, pay tax on 50% of their foreign income. This reduction applies to foreign income only; it does not apply to foreign chargeable gains. For 2026-27 onwards, tax will be due on all worldwide income in the normal way.   

From 6 April 2025, an individual who is not, or who later ceases to be, eligible for the new 4-year FIG regime will be taxed on foreign gains in the normal way. Transitionally, individuals who have claimed the remittance basis will, on a disposal of an asset held personally at 5 April 2019, be able to elect to rebase that asset to its value as at that date. 

From 6 April 2025, individuals who have been taxed on the remittance basis will be able to elect to pay tax at a reduced rate of 12% on remittances of pre-6 April 2025 FIG under a new Temporary Repatriation Facility (TRF) that will be available for tax years 2025-26 and 2026-27. TRF will not apply to pre-6 April 2025 FIG generated within trusts and trust structures. 

From 6 April 2025 the government intends to move inheritance tax from a domicile based regime to a residence based regime. This will be subject to consultation."

Trust income and gains

"From 6 April 2025, the protection from tax on income and gains arising within settlor-interested trust structures will no longer be available for non-domiciled and deemed domiciled individuals who do not qualify for the new 4-year FIG regime. FIG arising in the trust (whenever established) from 6 April 2025 will be taxed on the settlor on the same basis as UK domiciled settlors at present, unless the settlor is eligible for the new 4-year FIG regime. 

From 6 April 2025 the matching of pre-6 April 2025 FIG to trust distributions will continue, but UK resident non-domiciled individuals will no longer be entitled to the remittance basis in respect of worldwide trust distributions. Beneficiaries and settlors who are within the 4-year FIG regime will also be able to receive benefits from 6 April 2025 free from any UK tax charges whether or not the benefits are received in the UK. However, such benefits are not matched to trust income and gains and will be subject to a modified onwards gift rule."

Inheritance tax

"It is envisaged that the new rules will involve charging IHT on worldwide assets owned outright when a person has been resident in the UK for 10 years (the “residence criteria”), with a provision to keep a person in scope for 10 years after leaving the UK (the “tail” provision). The design of the system (including consideration of further criteria such as other connecting factors) will be subject to consultation. UK situs assets will remain in charge on the same basis as at present, regardless of residence.

It is also envisaged that the new rules for chargeability of assets comprised in a settlement will depend upon whether a settlor meets the residence criteria or is within the tail provision at the time the assets are settled and/or when charges such as 10-year anniversary charges or exit charge arises.  

The design of the system (including consideration of further criteria such as other connecting factors) will be subject to consultation. UK situs assets will remain in charge on the same basis as at present, regardless of residence.  

The treatment of non-UK assets that are settled by a non-UK domiciled settlor and become comprised in a settlement prior to 6 April 2025 will not change. For these settled assets:   

• provided the assets in the settlement continue to meet the legislative requirements to be excluded property under current legislation, and subject to any future anti-avoidance provisions, there will be no IHT charges; and 
• the interaction between the gift with reservation provisions and excluded property trust rules will also remain, meaning excluded property will not be brought into charge on the settlor’s death even if the settlor retains a benefit in the trust assets.  

The exception to this is that the treatment of non-UK property comprised in a settlement that currently comes back into the scope of inheritance tax where the settlor is a formerly domiciled resident (see above) will be subject to consultation."