Budget 2024: winners and losers

In every UK Budget, as in life, there are winners and losers. For every person out living the high life celebrating a big lottery win, there is someone reading an article about tax on LinkedIn.

Budget 2024 was no different, with several policy changes which impact specific groups of taxpayers rather than the population more generally, with the main exception of the cut in National Insurance. Consilium’s Tax expert Craig Coyle takes a look at some of those winners and losers.

Budget 2024 winners: middle earners with children

Leaving aside the years of dealing with nappies, sickness and being a taxi service, it was a very good week for part of this group. The High Income Child Benefit Charge previously applied to any household claiming child benefit in which someone earned more than £50,000, resulting in potentially very high effective tax rates between £50,000 and £60,000 depending on how many children were claimed for.

The threshold is being increased from £50,000 to £60,000 with the withdrawal of child benefit being more gradual. Consequently, those earning less than £80k will retain some entitlement. There was also the promise of a review to consider total household income rather than the position of the highest earner to deal with some of the perceived unfairness of the current system. For example, at present a couple both earning £49,999 can claim child benefit in full yet a household with one person earning £60,000 and the other earning zero will receive nothing.

Budget 2024 losers: those with furnished holiday lets

The Furnished Holiday Lettings regime provided tax advantages for those involved in the short-term letting of property that met certain criteria, with preferential treatment for capital allowance and Inheritance Tax purposes. This relief was intended to help a struggling area of the economy at the time.

The rise of AirBnB and similar providers has meant that this area is no longer considered to be struggling. Indeed, it is now seen as a barrier to home ownership in some areas, and therefore, the relief will be withdrawn from April 2025.

A good day for those selling residential properties

Anyone selling residential property (with the obvious exclusion of those selling their main residence) will benefit from a reduction in the Capital Gains Tax rate from 28% to 24% from 6 April 2024. That will create the slightly odd position of potentially delaying transactions until that date but will be helpful to those either selling property or potentially transferring it into a limited company, for example.

Mr Hunt is a potential beneficiary of this change, but he has said he will pay his own made-up tax rate, which sounds like something HMRC’s software will be able to deal with effortlessly.

A bad day for non-doms

The non-dom regime will be replaced from 6 April 2025, with a scheme based on preferential treatment for the first four years of residence in the UK only. It will be interesting to see how the concept of domicile, which is vital to Inheritance Tax, is replaced when considering if an individual’s worldwide assets are subject to UK Inheritance Tax.

Happy days for traders turning over £85,001 – £89,999

The small increase in the VAT threshold was heralded as something which will encourage growth. Those turning over £84k but did not want to move over the VAT threshold because of the impact of charging VAT to the consumer can now do another £5,000 of business (a cynic might suggest that some can put another £5,000 of business through their accounts). 

There remains a clear competition distortion caused by the VAT threshold. However, given that the threshold is always arbitrary, many think it is best dealt with by significantly lowering it so that almost everyone charges VAT and competes on an even footing.

Time for vapers to cough up

Bad news for lovers of e-cigarettes which smell like novelty perfumes, as duty will be applied to these from April 2025. The resultant price increase is presumably partly to price out children as well as raise tax revenue.

Budget 2024 biggest loser: the fuel duty forecaster

Fuel duty has been forecast to rise for 14 years, and yet in every one of these 14 years, it has not happened. Whoever is doing the forecasting might want to reconsider their approach. Unless, of course, it is a way to predict you will bring in more tax revenue to help your budget forecasts, when in fact you know full well that you will never do so, although this surely cannot be the case.

And with that, the Budget 2024 was over, other than a mention of an intention to abolish National Insurance. Again, cynics might say it is easy for Mr Hunt to make promises that he can be fairly confident he will not have to deliver. General Election predictions aside, there is a serious point about fundamental tax reform to remove some of the inequities in the system which have, as ever, got lost in the politics.

For advice on Budget 2024 or Tax planning in general, please contact our Tax partner Craig Coyle to arrange an informal virtual or in-person meeting.

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