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Spring Budget 2024: They Think NICs All Over…It May Be Soon

15 March 2024
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We’ve taken inspiration from/butchered the quote of BBC TV commentator Kenneth Wolstenholme, in the closing moments of the 1966 FIFA World Cup Final, for the title of our Budget Summary after the UK’s Chancellor of the Exchequer:

  • announced further National Insurance contributions (“NICs”) reductions, and
  • hinted (during his speech) that NICs could in future be abolished entirely.

The Chancellor also announced the beginning of the end for the remittance basis of taxation for individuals who are resident but not domiciled in the UK.

Both of the above announcements and more, most of which involve Three Letter Acronyms, or “TLAs”, are discussed in this Spring Budget 2024 summary.

NICs Changes

As part of the broader package of NIC rate changes alluded to above, the Chancellor announced further reductions to Class IV NICs from 6 April 2024. The main rate of Class IV NICs was, as announced in the Autumn Statement 2023, already due to be reduced (from 9%) to 8% from 6 April this calendar year. The reduction announced in the Spring Budget will take the rate down 2% further, and so from 6 April 2024 the main rate of Class IV NICs for the self- employed, applying to profits between £12,570 and £50,270, will be reduced to 6%.

The Chancellor had previously announced the abolition of the requirement to pay Class II NICs, from 6 April 2024, and so self-employed members of LLPs (for example) will be paying less NICs in 2024/25 than for the current UK tax year. We should just note that:

  • the actual abolition of Class II NICs will be the subject of consultation, as complexities arise where, for example, individuals have chosen to voluntarily make Class II rather than Class III contributions; and
  • any saving will be mitigated by, for example, the “fiscal drag” resulting from income tax thresholds remaining unchanged. Such income tax thresholds are currently scheduled to remain unchanged until 2028/29.

A further (to that announced in the Autumn Statement) NICs reduction was also announced for employees. A 2% reduction in the rate of Class I Primary NICs, from 10% to 8%, will apply from 6 April 2024. There was no such reduction in Secondary Class I NICs (for employers) which will remain at 13.8%.

In addition to the NICs rate freeze for employers, the additional rates (for employees and the self-employed) above the £50,270 threshold mentioned above will remain unchanged at 2%.

A consequence of the changes in NICs is their potential impact on Tax Motivated Incorporations or, inevitably, abbreviated to “TMI”. In this instance TMI isn’t Too Much Information, but the UK tax incentive for individuals to receive dividend income rather than earned income. Businesses conducted through UK LLPs, again, for example, have for some time weighed up the pro’s and con’s of being taxed as employee-shareholders instead of self-employed members. While this decision, of LLP members, will have to continue be made against the backdrop of the Salaried Member rules and, for regulated businesses, the regulatory capital differences, the Chancellor’s further reductions will impact the maths and needs to be borne in mind.


To finish this section, we return to where we began i.e., is the end nigh for NICs? This suggestion arose from the Chancellor’s Budget statement to parliament, in which he described income tax and NICs on earned income as “double taxation” and “unfair” (when compared with other income sources e.g., dividends). While the Chancellor has subsequently attempted to clarify his remarks in interviews, including with Sky News, saying that abolition is unlikely to happen “any time soon”, it does appear to be (under the current UK Government at least) the direction of travel. In other articles, we have talked about how combining Class I and Class 1A NICs may smooth the introduction of other HMRC initiatives. Removing NICs altogether will make such matters much simpler still, but will likely come at a cost to taxpayers. The cost being that income tax rates will likely go up. As the Chancellor commented to a Treasury Committee, on 13 March 2024, without directly answering a question as to whether income tax rates will need to increase:

“‘…it’ll be the work of many parliaments and we will make progress, but only when it’s affordable to do so…and we won’t do it through borrowing.”

The Abolition of Non-UK Domicile Status

The first thing to note is that the sub-heading of this section is wrong, even if appearing frequently in post-Budget summaries. The Chancellor did not announce the end of “non-dom status”. Domicile is a broader legal concept and will remain so. What the Chancellor did announce, in the Spring Budget, was the ending of the UK tax benefits that may result from such status.

Pedantry aside, the measures announced were as follows:

  • The Chancellor plans to abolish the non-dom [tax] regime from 6 April 2025, replacing it with a residency-based system;
  • The incoming regime, based on the UK tax-free receipt of foreign income and gains (“FIG”) during the first four years of UK residence, and which must be claimed each year, will be available from 6 April 2025 to those:
    • entering the UK tax net that have had 10 consecutive years of non-UK residence; and
    • existing UK resident but not-UK domiciled individuals that have been resident for fewer than four tax years (after a period of 10 consecutive years non-UK tax residence). Such individuals may choose to use the FIG basis up to the end of their fourth year of UK tax residence.
  • Those within the 4-year FIG period need not remit their foreign income to the UK. Should they do so, no UK income tax will arise (as it might under the current remittance rules) but a loss of the Personal Allowance (which may be already lost, due to the level of the individual’s income) and Capital Gains Tax (“CGT”) exemption will result.

The UK’s Statutory Residence Test (“SRT”) will apply to determine tax residence for a tax year, as opposed to a definition within the UK’s numerous double taxation treaties. Any UK split-year, for the purposes of the SRT, will count as a year of residence for the incoming rules.

As noted above, a claim must be made for each year in which an individual wants the new regime to apply (assuming they do). Where an individual ceases to be UK resident during the four-year FIG period, a claim will be possible (upon their return) in respect of any years remaining. Should the taxpayer wish to qualify for another 4-year FIG period, they will need to achieve 10 consecutive years of non-UK residence.



  • Individuals that:
    • move from the remittance basis to the arising, or “worldwide”, basis upon the abolition of the current regime, on 6 April 2025, and
    • are not (due to the existing length of their UK residency or the absence of a period of 10 consecutive years non-UK tax residence) eligible for the 4-year FIG period

will pay tax on 50% of their 2025/2026 foreign income (whether remitted or not). This reduction is to apply to foreign income only, and so will not apply to foreign chargeable gains.  For 2026/27 onwards, UK tax will be due on the worldwide income of such individuals in the normal/UK domiciled individual way;

  • There will also be a rebasing of assets within the charge to UK CGT as at 5 April 2019 where a currently UK resident but not UK-domiciled individual, utilising the remittance basis, makes a post 6 April 2025 disposal. This is subject to conditions, the details of which are awaited; and


  • In terms of remittances, a Temporary Repatriation Facility (“TRF”) will also be introduced via a 12% rate of tax applying to remittances of FIG in tax years 2025/26 and/or 2026/27 where the FIG arose before 6 April 2025.  Often ‘mixed fund’ ordering can complicate calculations but the Government has promised some relaxation of these rules to make it easier for individuals to take advantage of the TRF if, for example, they have FIG in a mixed fund or they are unable to precisely identify the quantum of their FIG.  From 2027/28 remittances of pre-6 April 2025 FIG will be taxed at normal tax rates.

Overseas Workday Relief

Those hoping to benefit from Overseas Workday Relief (“OWR”) will be relieved that it has been 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. Indeed the concept of remittance will cease to be relevant to OWR also, and so relief will be able to apply whether or not the earnings are remitted to the UK.

A Matter of Trusts

From 6 April 2025, the UK Government proposes to remove the protection from taxation on future income and gains as it arises within trust structures (whenever established) 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.

As the Treasury’s policy paper reveals there are a number of related matters that will have to be addressed as part of this major reform to the taxation of non-UK domiciled individuals.  The Treasury says that there are further details to follow, such as points of detail concerning Inheritance Tax (“IHT”), which will be settled after consultation with representative bodies and other interested parties. One eye catching IHT measure was the suggestion of a 10-year tail, such that those ceasing to be UK resident may remain within the charge much longer than is currently the case. A 10-year period would in fact exceed the 7-year time period over which an outright transfer could become IHT exempt.

All of the above raises questions as to whether the UK is to become less competitive for internationally mobile talent? While the instant reaction may be “of course”, will this necessarily be the case? For example, many headlines were written about such a result when the UK increased its highest headline rate of income tax to 50% (for 2010/11) but did the predicted exodus really ensue?  Leaving aside that it’s much harder to count those who don’t come (as opposed to those who leave) there are differences to then and now. For example, in alternative asset management, the 50% headline rate of income tax existed at a time before Mixed Membership and Disguised Investment Management Fee anti-avoidance rules, and when the United Arab Emirates (for example) was not such a compelling alternative as it arguably is today.

It is also worth noting that the 50% income tax rate was introduced by a Labour government. With higher earners already nervous about what a Labour government in 2025 could bring, the non-dom changes are unlikely to calm nerves or put any existing relocation/relative expansion plans on ice.

Returning to the point of “those who don’t come”, there is arguably a short-term nature to the incoming 4-year FIG rules. Compared to the current regime, is a 4-year tax free period enough to incentivise wealthy entrepreneurs to move to and invest in the UK? Or is it too short and actually those who will benefit from the new rules will be those in the UK for much shorter periods? Those whose contributions to the UK, its culture and its communities will be more short-lived. Those who do not invest either for the longer term or indeed at all. The counter to this argument is that currently non-UK domiciled individuals either cannot remit overseas income or gains to the UK to invest without incurring a UK tax charge or have to meet strict investment relief criteria. In the 4-year FIG system, overseas income and gains are not taxed even if remitted.

The only thing we know is that we don’t know exactly which way will this will go. History relates though that while the non-domicile system of UK taxation is unlikely to return (at least by the same name) its successor is likely to be tweaked if this election year gamble does not pay off for the UK.

Changes to the Transfer of Assets Abroad rules

More of a technical amendment than a headline grabber, this one. The legislative change resulting from HMRC finding themselves on the wrong side of a Supreme Court decision.

With effect for income arising to persons abroad on or after 6 April 2024, the legislation (intended to prevent UK taxpayers paying less tax by arranging for income to arise to a person abroad instead) will be amended with the goal of ensuring that individuals cannot use a company to bypass the rules.

In the UK Government’s words:

“The measure will introduce a provision that deems individuals who are participators in a close company, or a non-resident company that would be close if they were UK resident, as transferors to address situations where transfers are made by such companies. This change will ensure that a transfer made via a company, in which the individual is an owner or has a financial interest, will be considered a ‘relevant transfer’ by that individual for the purposes of the…legislation.”

Even before this change the Transfer of Asset Abroad rules were fiercely complex. The proposed addition won’t reduce complexity and so any individual considering transferring assets outside of the UK is strongly encouraged to seek professional advice before doing so.

Introduction of the Reserved Investor Fund

Readers may well be familiar with the Qualifying Asset Holding Company, or QAHC, which was introduced to boost the UK’s asset management industry. The latest abbreviation attempting to achieve the same goal is to be the Reserved Investor Fund (“RIF”).

The UK Government says:

“The RIF is designed to complement and enhance the UK’s existing funds regime by meeting industry demand for a UK-based unauthorised contractual scheme with lower costs and more flexibility than the existing authorised contractual scheme. The RIF will be open to professional and institutional investors. It is expected to be particularly attractive for investment in commercial real estate.”

As yet, there is no effective date. This will be determined by a statutory instrument to be laid at a later date.

The upcoming Finance Bill will:

  • define what a RIF is,
  • and provide the necessary authority for HM Treasury to make regulations in respect of RIFs.

The detailed rules will:

  • set out qualifying criteria for RIFs, including entry and exit provisions (and, where relevant, notification requirements);
  • set out provisions for breaches and mitigations, where a RIF fails to meet the qualifying criteria;
  • set out how gains on a deemed disposal and reacquisition of investors’ units will be treated for capital gains purposes, and
  • make technical amendments to existing UK tax legislation e.g., extending the current treatment of tax transparent funds to RIFs, where certain conditions are met.

Furnished Holiday Lettings

Sad news for tax students who so enjoyed studying the intricacies and quirks of the UK’s Furnished Holiday Letting “(FHL”) rules. The furnished holiday lettings tax regime, which provides tax advantages for short-term furnished holiday properties, will be abolished from 6 April 2025 having been introduced in 1982/83.

For those who:

  1. do not live in areas of the UK where, it is felt, furnished holiday lets and/or second home ownership has made the first rung of the property ladder a step too far;
  2. don’t own a FHL;
  3. aren’t UK tax experts

the abolition of the FHL rules is unlikely to attract much interest. For those in B and C above, the loss of certain tax reliefs will not go unnoticed. For example:

  • Currently, interest incurred on loans for the purpose of a FHL business are treated as a deduction from rental income in calculating taxable profits of the business. The interest is not subject to the cap/credit system impacting non-corporate owners of property. From 6 April 2025, interest for businesses operated by individuals will no longer be a deductible expense. UK tax relief will instead be given as a 20% tax credit from the individual’s tax liability. This will increase the tax payable by higher rate taxpayers, and introduce them to a decision others have faced before i.e., whether to “envelope” their property, through corporate ownership;
  • Disposals of FHLs will no longer qualify as a disposal of a business asset meaning the 10% rate of tax potentially available will, from 6 April 2025, be at least 18%;
  • Furthermore, FHL disposal gains may currently qualify for CGT rollover relief i.e., if a replacement qualifying asset is purchased, a claim can be made to deduct the capital gain from the tax base cost of the new asset and so deferring the tax point of the gain;
  • From 6 April 2025, those individuals who rely on profits of a furnished holiday lettings business to support obtaining tax relief for their pension contributions may need to seek appropriate advice.

While the loss of rollover relief may make owners consider accelerating a sale, although not before 6 April 2024 (please see below) care needs to be taken as the Chancellor did announce a forestalling measure as part of this package (through the use of unconditional contracts).

Sales of Second Homes

In an announcement touted as supporting the UK housing market, the Chancellor announced a 4% reduction in the rate of CGT applying to the sale of second homes, and additional residential properties, to 24%. The rate reduction will apply from 6 April 2024.

The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band.

While the intention is to encourage owners to sell, the measure may cause a temporary pause. Those who were already planning to abandon the buy-to-let market, in response to the burden of compliance with ever expanding legislation and the restriction on the amount of tax deductible mortgage interest, may well ask their conveyancing solicitor to drag their feet. The pressure will then be reapplied to conclude the transaction quickly after 6 April. Such a strategy will need to be measured against the risk of a buyer withdrawing, perhaps wishing to test whether there will be an increase in alternatives on the market.

Unlike FHL, the relevant notice made no mention of forestalling (in policy paper at least).

VAT Threshold

With effect from 1 April 2024, the Chancellor has announced an increase in the VAT registration threshold (from £85,000) to £90,000

While the UK Treasury asserts that 28,000 businesses will benefit in 2024/25 from no longer being VAT registered, it remains to be seen whether those dipping under the threshold will de-register. While doing so should reduce their compliance costs, potentially reduce their prices to customers or improve margin, it will also remove their ability to reclaim VAT on the costs the business incurs. Such businesses may therefore prefer to remain registered if in a net repayment position with HMRC.

If you have any questions in respect of the above, please do get in touch with Sutharman Kanagarajah, Stuart Gartery or with your existing Centralis contact.