Spring Budget 2024: Overview for Contractors

In the Spring Statement, the Chancellor, Jeremy Hunt, set out his plan to promote growth. In this post, we look at the key tax changes that contractors need to know about.

Headlines for contractors:

“A disappointing Budget for the contracting sector, there was very little in the way of targeted support for contractors and consultants. Umbrella regulation saw a mention in the budget document, however there was no reference to IR35 or offpayroll reforms.”

Spring Budget 2024 Key Points:

Personal tax

The government is cutting the main rate of employee National Insurance by 2p from 10% to 8% from 6 April 2024. Combined with the 2p cut announced at Autumn Statement 2023, this will save the average worker on £35,400 over £900 a year.

The government is also cutting a further 2p from the main rate of self-employed National Insurance on top of the 1p cut announced at Autumn Statement 2023. This means that from 6 April 2024, the main rate of Class 4 NICs for the self-employed will now be reduced from 9% to 6%. Combined with the abolition of the requirement to pay Class 2, this will save an average self-employed person on £28,000 around £650 a year.

Child benefit

From April 2024, the current threshold at which the High Income Child Benefit charge applies is being changed from £50,000 to £60,000. Also changing is the amount at which an individual loses all entitlement. This is increasing to £80,000 from the current £60,000 threshold.

Value Added Tax (VAT)

From 1 April 2024, the threshold at which businesses are mandated to register for VAT is being increased from £85,000 to £90,000. The deregistration threshold is also being increased from £83,000 to £88,000.

Umbrella regulation

The Budget document reiterated the government’s commitment to tax avoidance in the umbrella sector, saying it will “set out next steps for tackling non-compliance in the umbrella company market shortly.”

Non-domiciled status

Non-domiciled status will abolished and will change to a residency-based regime, with a two-year arrangement for those currently classed as non-domiciled to transfer to the new regime.

From April 2025, new arrivals will not pay any tax on foreign income and gains for their first four years in the UK. If in the UK after four years, then they will be taxed like any other UK taxpayer.

Furnished Holidays Let tax regime abolished

The government is abolishing the Furnished Holiday Lettings tax regime to “level the playing field between short-term and long-term lets.” From 6 April 2025, short-term and long-term lets will be treated the same for tax purposes. Individuals with FHL and non-FHL properties will no longer need to calculate and report income separately.

Capital Gains Tax higher rate cut

From 6 April 2024, the higher rate of property Capital Gains Tax will reduce from 28% to 24%.

Multiple dwellings relief abolished

From 1 June 2024, the government is abolishing Multiple Dwellings Relief (MDR), a bulk purchase relief in the Stamp Duty Land Tax regime.