Spring Budget 2024

As usual our team were following the Budget announcement by the Chancellor, Jeremey Hunt, with keen ears today, listening out for key industry updates and those announcements that affect our services and clients. We have had a busy few years listening to the Budget announcements, with significant changes to property tax, specifically capital allowances, happening in nearly all of the fiscal events since the end of 2020.

Today (06 March 2024) however was a more steady day, with the Chancellor's announcements clearly aimed at voters, in what is expected to be an election year. The main announcement being the saving of £900 per year for the average employee, following a 2% cut in National Insurance Contributions, combined with the Autumn Statement’s prior 2% cut.

The good news is that comes with some positive market sentiment, with the Office for Budget Responsibility (OBR) expecting the UK economy to grow 0.8% this year, and 1.9% in 2025, following the recent statement of consecutive quarters of negative growth. Along with some positive news for investment with inflation now down to around 4% and this expected to fall below 2% in 2025. This bolstered by AstraZeneca’s commitment to £650 million of investment in Liverpool and increasing their presence in Cambridge.

The Chancellor also announced an increase in the VAT threshold, up from £85,000 to £90,000. Albeit, this was the first increase in seven years, hence making it £100,000 or £120,000 may well have had more of an impact in removing many more SME businesses from the bureaucracy of VAT.

Property tax was somewhat of a middling agenda in the Spring Budget 2024 – many of the headlines here stolen by abolishment of incentives rather than tax cuts, although the Chancellor did announce a reduction in the higher rate of property Capital Gains Tax (CGT) from 28% to 24%.

Along with the abolition of the Multiple Dwellings Relief for Stamp Duty Land Tax (SDLT), we also saw time called on tax relief for Furnished Holiday Lets (FHLs) from 06 April 2025.

FHL Capital Allowances Abolished

Capital allowances have long been available on FHLs, a caveat to the usual entitlement restriction for dwellings, an incentive that could allow the offset of large portions of taxable income from capital investment in the properties – sometimes in excess of 60% of the capital spend. However, there has been a cloud looming over FHLs since Brexit, creating uncertainty around the relief that was available against both UK FHL investment and across the European Economic Area. Thus, it is not a change in measures that comes entirely out of the blue.

The Chancellor’s official position on this from the statement is to drive a transition to having better availability of longer term tenancies, where housing availability is becoming increasingly scarce. However, reducing or removing tax relief that is otherwise unavailable on residential properties does not really provide a significant impact to instigate change, especially where the profitability of holiday homes – advertised on such places as Airbnb – is substantially higher than the longer-term Assured Shorthold Tenancy (AST) rental alternative. This change may not be welcomed by those operating in the rural economy or by the tourism sector, which may just see this as more tax take.

It is therefore important to ensure that any current or past FHL expenditure has been properly analysed, to take advantage of accelerated capital allowances, before this tax relief is lost for good.

Full Expensing Amendment

Finally, a minor amendment to capital allowances, following lobbying from industry, the Full Expensing First Year Allowance (100% main, and 50% special rate, pool expenditure) will be extended to leased assets, subject to draft legislation and affordability. It has been widely discussed in the marketplace that only allowing those who own capital assets to benefit from the accelerated relief unfairly disadvantages those who cannot afford to invest heavy sums buying new equipment – the Chancellor addressed this with this measure.

Full Expensing is however still only available to UK Corporation Tax payers, on expenditure on new assets. Therefore, this measure does only bring a small number of businesses into the fold and could have benefitted a far greater majority having also been extended to Income Tax payers, such as partnerships of doctors, the farming industry and professional services firms.

Freeports & Investment Zones

The extension to Freeport tax reliefs announced at the Autumn Statement 2023 have also been confirmed.  The sunset date of 30 Spetember 2031 will apply across English Freeport tax sites, with a 10-year window to claim reliefs also agreed with the Scottish and Welsh Governments, meaning tax reliefs will be available until 30 September 2034 for Scottish Green Freeports and Welsh Freeports tax sites.  A welcome change given that much of the intial 5-year period, originally until 30 September 2026, had been eaten into while the new Freeports cut through the red tape of getting set up, with no opportunity to make use of the tax reliefs until this had been completed.

Further details on how the £160 million funding envelope will be used by Investment Zones in Greater Manchester, Liverpool City Region, North East of England, South Yorkshire, West Midlands and West Yorkshire have also been released. Also confirming the Tees Valley Investment Zone will focus on the digital and creative sectors; additional details for the Tees Valley and East Midlands Investment Zones will be announced shortly.

Investment Zones will also be extended from five to ten years in Scotland and Wales, matching their English counterparts, following the Autumn Statement 2023 announcement. Full details of the four Scottish and Welsh Investment Zones will be announced later in 2024. Details on the Northern Ireland Enhanced Investment Zone will be published soon.

Next Steps

If you would like to discuss how any of the Budget announcements affect your investments, then please do contact the team on 0345 230 6450 or hello@e3consulting.co.uk with any queries or for assistance. We look forward to speaking with you soon.