Budget reaction from South West accountants Albert Goodman

6 March 2024

Holiday lets

Kathryn Loader, Assistant Tax Manager at Taunton-headquartered accountancy firm Albert Goodman, said: “Abolishing furnished holiday let rules will mean holiday let owners will no longer benefit from capital allowances on their holiday properties.

“Equally they will no longer benefit from the lower rates of CGT on the sale of their holiday let properties, instead being taxed at the normal rates for residential properties 18%/28% – although the higher rate of CGT will be reduced to 24% as announced in the Budget.”

Jackie Reeves, Senior Tax Manager at Albert Goodman, said: “Significant changes are being made to the taxation of foreign income and gains for so-called ‘non-doms’, who currently can enjoy significant breaks from UK tax for up to 15 years. The new regime will bring these foreign sources into the UK tax net after only 4 years, and the complex ‘remittance basis’ of taxation will disappear.

“There will be a greater administrative burden as foreign taxpayers are required to report their worldwide income and gains on their annual tax returns, and relief from double tax charges in both the UK and overseas will need to be sought via the UK’s system of double tax agreements.

British ISAs

Reme Holland, financial planning partner at Taunton-headquartered accountants Albert Goodman, has issued a cautious welcome to Chancellor Jeremy Hunt’s announcement in his Budget speech today that the British Isa which will be introduced to encourage savers to invest in UK assets

Holland said: “Any further increases to the ISA are welcome. I can see the logic of encouraging investment in Britain, however, clients should keep in mind the benefits of diversification when considering their approach to investments, the world is a big place.”

Inheritance Tax

Reacting to the absence of changes to Inheritance Tax, Kayleigh Oaten, Assistant Tax Manager at Albert Goodman accountants, said: “For those hoping for a simplification, reduction in rates, or even abolishment of inheritance tax, there was nothing.

“Perhaps something to look out for in the Conservative manifesto but a hardening of the rules is perhaps more likely under a future Labour government. Considering exposure to inheritance tax in advance of the election may be a wise decision.”

Multiple Dwellings Relief

Tracey Watts (pictured right), Tax Partner at Taunton-based Albert Goodman accountants, said: “HMRC have had a spate of successful wins against spurious claims for multiple dwellings relief, which works to reduce the amount of SDLT payable when buying multiple “residences” together, where there has not been a clear purchase of more than one dwelling.

“Typical challenges won by HMRC have included claims for connected annexes, granny flats, locked rooms in a main house or garden flats/garages purchased as part of a main house, so it is a real surprise to see this relief withdrawn for genuine multiple purchases, and might work to dampen the housing market.

“The abolition will apply to any contracts exchanged after 6 March 2024, and not completed before 1 June 2024.”

Vat registration limits

Tracey Watts, Tax Partner at Taunton-based Albert Goodman accountants, said: “The VAT registration threshold has been increased for the first time in seven year, increasing from £85,000 to £90,000 from 1 April 2024. It is a shame that Mr Hunt did not take the opportunity to address the cliff edge for businesses once the threshold is reached, but any increase is welcomed.”

Furnished Holiday Lettings

Tracey Watts, Tax Partner at Taunton-based Albert Goodman accountants, said: “As rumoured, the Chancellor said he is abolishing all tax breaks attached to furnished holiday lets, but there was no further detail in his Speech.

“The Budget Note released shortly after refers only to tax breaks being withdrawn from April 2025, so there will be a delay to any changes, but expected to go will be: tax relief on interest costs; capital allowance claims on furniture, fixtures and fittings; 10% CGT on disposals of FHL businesses; being able to use FHL income as net relevant earnings to frank personal pension contributions and rollover relief claims where sale proceeds are reinvested into a new FHL.

“The Budget Note says the changes will be incorporated into draft legislation to be issued shortly, but could mean that there will be adverse tax hits for FHL owners in 2025/26, depending on how the transitional rules to abolition are dealt with, particularly where capital allowance claims have been made.

Immediate anti forestalling measures will be introduced to prevent FHL owners from taking advantage of the lower CGT rates that would otherwise extend into 2024/25, before FHLs become ordinary letting properties, where the CGT rate for ordinary lets has been reduced from 28% to 24% from April 2024.

The changes follow a recent announcement for FHL owners to have to licence any new FHLs from mid-2024 with their Local Authorities – FHLs are the latest in a long line of attacks on tax breaks for residential property owners.

Child Benefits

Anne Gardner-Thorpe (pictured left), Albert Goodman Tax Partner, said: “The ‘traditional’ family home where two parents work and two children are at school will be delighted by the changes to the changes to the High Income Child Benefit Charge.

“Previously the rules began to restrict the amount of Child Benefit that could be retained where one parent in a household earns £50,000. Where such an earner receives more than £60,000 per annum child benefit is fully removed.

“For a couple where one parent earns £60,000 this means that Child benefit of £24 per week for the first child and £15.90 per week for the second child is “lost”. This equates to £2,074 per annum. A family in this situation will be better off with effect from April this year as the Child Benefit can be retained.

“Whilst a review of the system that applies in this situation has been announced, an immediate change to the “taper” thresholds has been introduced with effect from 6 April 2024.

“The starting threshold (where child benefit will begin to be removed) has been increased to £60,000 (from £50,000). And child benefit won’t be fully removed until an earner in the household earns at least £80,000 (previously £60,000). By increasing the band’s “width” from £10,000 to £20,000 also reduces the marginal tax rate which will apply for tax payer’s unfortunate enough to find themselves penalised by this measure.

“Previously the two-child household above would have faced a 62.7% marginal tax rate on income between £50,000 and £60,000. The marginal rate that will apply between £60,000 and £80,000 will now be 51.4% when the removal of child benefit is taken into account. As such workers impacted will hopefully now be more inclined to work overtime or accept a promotion.

“By amending the way in which tax interacts with child benefit is very much in keeping with the theme of Mr Hunt’s budget of ‘get Britain working’.”

Tracey Watts, Tax Partner at Taunton-based Albert Goodman accountants, said: “While the immediate increase in the threshold from £50K to £60K, over which child benefit claims are withdrawn, is welcomed, the proposed consultation with HMRC to work out how the higher earner can be replaced with the household’s income, is not. This threatens to bring in many more couples into having their child benefit claims reduced.”