Chancellor Jeremy Hunt today abolished Furnished Holiday Lettings relief and the non-dom tax status

The Chancellor managed to find enough wiggle room in the deteriorating economic forecasts to announce a further 2% cut to national insurance as the government gears up for a general election later this year. 

Jeremy Hunt was able to scrape together the money to make the national insurance cuts by announcing revenue-raising initiatives such as abolishing the non-dom tax status, abolishing the furnished holiday letting (FHL), abolished multiple dwellings relief, introducing a duty on vapes and extending the windfall levy on oil and gas companies. 

While a lot of the contents of the Budget was leaked ahead of the speech, the one rabbit that the Chancellor saved to pull out of the hat in the House of Commons was his plans to reform the high-income child benefit charge (HICBC). 

And in the first increase in seven years, Hunt also increased the VAT threshold to from £85,000 to £90,000 from 1 April. “That will bring tens of thousands of businesses out of paying VAT altogether and encouraging people to invest in growth.”

Hunt may have pulled out some tax cuts, but he did so under circumstances that he didn’t anticipate at the time of the Autumn Statement when he was handed a £26bn windfall to play with. It was a different story today, with Hunt’s so-called headroom diminished to around £13bn. 

Among the tax measures announced in the Spring Budget were: 

  • 2% cut to the main rate of income tax from 10% to 8%
  • Self-employed national insurance cut from 8% to 6%
  • Abolished multiple dwellings relief
  • Reduced the higher rate of CGT on property sales from 28 to 24% 
  • VAT threshold increased to £90,000
  • Reformed the High-Income Child Benefit Charge
  • Introduced brand new ISA which allows an additional £5,000 annual investment
  • Abolished Furnished Holiday Lettings relief
  • Abolished the non-dom status
  • Introduced duty on vaping products from October 2026 plus one-off 
  • Frozen the fuel duty for the 14th year in a row for another 12 months, maintaining the 5p cut
  • Extended the alcohol duty freeze until February 2025
  • Made tax reliefs for orchestral productions permanent
  • £1bn in additional tax relief for creative industries over the next five years 

Personal tax cuts

  • The 2% cut to the main rate of national insurance comes after rumours that, confronted with scarce resources, the Chancellor and the Prime Minister were deliberating whether to cut NI again or income tax.
  • The Prime Minister’s preferred option was to cut income tax, after pledging in his last Budget that he was going to cut the basic rate from 20% to 19% by 2024. However, they opted to repeat the same 2% national insurance cut that was announced in the Autumn Statement. 
  • The decision to go with national insurance rather than income tax may just come down to cost. A 1% cut in income tax comes at the price of £7bn while the same cut in national insurance is £4.5bn. 
  • The national insurance cut in the Autumn Statement came into force in January and going but Hunt today, he wants more cuts to come. "Our long-term ambition [with national insurance] is to end this unfairness when it is responsible when it can be achieved without increasing worry when it can be delivered without compromising high quality public services. We will continue to cut national insurance as we have done today." 
  • Employers NIC set at 13.8%, and that stands in the way of any NIC/ income tax merger in the future. 
  • Hunt was able to afford this NI tax giveaway through a number of revenue-raising announcements, such as targeting short-term holiday lets and the non-dom tax status.

Furnished Holiday Lettings and property

  • The FHL announcement came as a shock when it was leaked over the weekend and also poses significant change for accountants to grapple with. As raised by Caroline Miskin from ICAEW’s tax faculty, the change would make MTD ITSA easier to design but could lead to disputes over whether there is a property trade. 
  • Hunt reasoned this change, arguing that it would help alleviate the strain of housing in coastal areas where landlords are snapping up properties and converting them to holiday lets. 
  • “Concerned this tax regime is creating a distortion, meaning there are not enough properties available for long term rental. So to make the tax system work better for local communities, I have abolished the relief” 
  • In other property tax announcements, Hunt abolished the multiple dwellings relief and in a swipe at Labour’s deputy leader, he reduced the higher rate of CGT on property sales from 28 to 24%. 

Non-dom status

  • The other revenue raiser was abolishing the non-dom tax regime. This had long been one of the Labour Party’s policies. 
  • The government will abolished the current system for non-doms and we will replace the non-regime with a modern, simpler and fairer residency 
  • New arrivals from April will not be required to pay tax on foreign income and gains for their first four years. Those that continue to live in the UK will pay the same tax..  
  • The non-dom tax regime has long been a thorn in the side of the Prime Minister after it emerged in April 2022 that his wife had this status. She has since relinquished this status, but for a while, the Prime Minister was accused of having a conflict of interest as this particular tax regime remained untouched. 

High income child benefit charge

The Chancellor has come under pressure from all directions to address some of the more unfair aspects of the charge, which has now become a regular feature in the first-tier tax tribunals. 

He said the government will consult on moving the HICBC to a household-based system by April 2026. Because that is not quick enough, from April the HICBC will be raised from £50,000 to £60,000. Hunt said this will take 170,000 families out of the regime. 

Business investment

Extension to the Recovery Loan Scheme and renaming it as the Growth Guarantee Scheme, which he said would help 11,000 SMEs to access funding. 

“Small businesses being able to access the finance they need to grow and invest is crucial if we're to grow our economy.”

Hunt also announced that he was going to “reduce the administrative and financial impact” for small businesses and increase the VAT threshold to £90,000. The VAT threshold had been frozen to April 2026.

The first investment zones in the North of England and the Midlands will be launched in April. 

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