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In the Spring Budget 2024, the Chancellor of the Exchequer, Jeremy Hunt MP, announced the tax policy changes that will take effect, but what are the key takeaways for trustees, charities and individuals?
Trustees
Trustees of a Trust where the only income is savings interest now have confirmation of a £500 de minimum rule, meaning that if the income is up to £500, the trustees do not need to report to HMRC. If the income is over £500 then all of the income must be taxed at the 20% standard rate. This is different from income tax banding as all income is taxed not just that over £500. Whilst this is a significant benefit for low-income Trusts, other trustees should be conscious that they may now need to register as a taxable Trust and submit self-assessment tax returns.
The Government still has not simplified the need for trustees to report all dividend income (with no matter the de minimis amount), with comment that any changes will be part of a longer-term review.
Trustees, individuals, and personal representatives who pay Capital Gains Tax (CGT) on residential property sales will know all too well about the significant reductions in the Annual Exempt Amount (AEA) over recent years with the AEA halving to £3,000 for individuals, and £1,500 for trustees from 5 April 2024.
From 6 April 2024, the Government will introduce a reduction in the rate of tax charged on higher rate taxpayers from 28% to 24%. The lower rate of CGT will remain at 18%.
The main rate for trustees and personal representatives for CGT (not on residential property) remains at 20%.
Trustees, individuals, and personal representatives should remember to check if CGT is payable on sales of residential property and submit the CGT on UK Property Return within 60 days of the sale, if applicable.
Charities
Gift Aid legislation will be updated via the Digital Markets, Competition, and Consumers Bill to ensure that eligible charities with subscription based donation models can continue to receive the all important Gift Aid contribution.
Individuals
The most welcome tax cut for individuals is the reduction to National Insurance which means more wages in your pay packet. The Government has confirmed that the cost will be met by other tax increases, higher Government borrowing, and improved borrowing forecasts. Whilst it may be a while before we see the outcome of the tax increases and borrowing, the immediate wage increases will be felt by all. Class 1 employee contributions are cut from 10% to 8% and class 4 employee contributions are cut from 8% to 6%, all from April 2024.
The rates of tax on dividends will remain the same next year, but we will see the dividend allowance halved to £500.
The starting rate for savings income tax will stay the same next year, at 0% up to £5,000, and the personal savings allowance will remain the same.
The individual personal allowance will remain the same next year (£12,570) with a small increase to the income limit for married couples allowance, up to £37,000.
Stamp Duty Land Tax relief for first-time buyers will be extended to benefit individuals who purchase their home using a bare Trust or nominee arrangement.
Tax advisers and administration
The consultation into raising standards in the tax advice market is now live until 29 May 2024. The Government is reviewing the prevalence of unregulated tax advisers in the market, and ways to improve the service for clients who seek advice of regulated practitioners. The consultation will explore whether mandatory membership of a professional body (such as the Financial Conduct Authority or Solicitors Regulation Authority) should be implemented for anyone providing tax advice and corresponding with HMRC on behalf of a client.
In the meantime, clients should ensure to seek advice from a properly regulated adviser.
How can Nelsons help
Naomi McFadden is an Associate in our expert Court of Protection team. Naomi specialises in covering charity governance, Trust creation, and administration and deputyship appointments.
For further advice in the administration of your trust, or charity, please contact either Naomi or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online enquiry form.
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