Background
This week in Muras Matters we will look in more detail at the some of the other changes announced in the Budget 2024 that perhaps did not fully catch the headlines but which are likely to be of an impact to a wide range of taxpayers. Increases in the Stamp Duty Land Tax rates were announced but less published has been the fact that the thresholds at which these rates come into force will also be changing.
We will also look at the latest changes to the tax treatment of double cab pickups (yes another revision!) and company car tax.
Detail
Stamp Duty Land Tax
With effect from 31 October 2024 the rates of stamp duty land tax (SDLT) have increased from 3% to 5% above the standard residential rates of SDLT on purchases of second or additional properties, buy-to-let properties and for companies buying residential property.
For companies and ‘non-natural persons’ buying UK residential property worth over £500,000, the rate of SDLT has increased from 15% to 17%, again with effect from 31 October 2024.
The previous government introduced temporary cuts to SDLT in the Mini Budget of September 2022 which were due to end in March 2025. Unlike most of the measures introduced at that time, when Jeremy Hunt took over as Chancellor he did not repeal these temporary discounts. Under these current discounts, first-time buyers benefit from reduced stamp duty rates if they buy a property worth £625,000 or less, whilst all other buyers did not pay any SDLT on the first £250,000 of a property’s value.
The recent Budget confirmed that these temporary reductions in SDLT will end on 31 March 2025 as planned.
This means that for transactions with an effective date on or after 1 April 2025 the property limit for first-time buyers to qualify for stamp duty reduction will return to £500,000 and only the first £300,000 of the value of the property will be exempt from stamp duty, with 5% paid on any remainder up to the reduced £500,000 figure.
For all other buyers, for example those property owners moving to a new home, from April 2025 the £250,000 exemption will be removed and only the first £125,000 of a property purchase will be stamp duty free, with a 2% rate charged from £125,000 to £250,000.
Double Cab Pickups
It was only around 8 months ago in Muras Matters that we reported HM Revenue & Customs (HMRC) had announced a change to the guidance on double cab pickups and that they would be treated as cars for tax purposes, before a week later preforming a U-turn on that decision following criticism from farmers and the motor industry. The new Labour government has revisited double cab pickups as part of their first Budget and announced further changes to the tax treatment of these vehicles from April 2025. The changes will impact:
- the benefit in Kind (BIK) rules;
- capital allowances; and
- Some deductions from business profits.
The change in tax treatment will mean a double cab pickup will be treated as a car for tax purposes where the vehicle’s primary suitability at the time it was manufactured, with reference to the vehicle as a whole, is to be for the conveyance of goods or burden of any description. The new guidance will not refer to the payload of the vehicle as was previously the case. HMRC have stated that the change in approach is expected to result in most double cab pickups being treated as cars.
The change will come into force from 1 April 2025 for corporation tax and 6 April 2025 for income tax. However, transitional arrangements will apply to preserve the previous tax treatment for:
- Vehicles purchased, leased or ordered before 6 April 2025 for BIK rule purposes. In these instances, the transitional rules will apply until the earlier of either the disposal, lease expiry or 5 April 2029; and
- expenditure incurred before 1 October 2025 as a result of a contract entered into before 1/6 April 2025 for the purposes of the capital allowances rules.
No changes have been made to the VAT treatment and it is understood that HMRC will continue to consider a double cab pickup with a payload of one tonne or more as a goods vehicle.
Company Car Tax
The company car tax rates for benefits in kind (BIK) will continue to strongly incentivise the take-up of electric vehicles, while rates for hybrid vehicles will be increased to align more closely with rates for internal combustion engine vehicles. The changes announced in the Budget were as follows:
- Zero emission and electric vehicles BIK rate will increase to 7% in 2028/29 and to 9% in 2029/30. Currently the rate is 2% for 2024/25 and will increase by 1% each tax year to reach 5% by 2027/28;
- For cars with emissions of 1g to 50g of CO2 per kilometre, including hybrid vehicles, the rate will rise to 18% for 2028/29 and 19% for 2029/30. This is a significant change given for some vehicles the current year BIK rate is as low as 2%; and
- For all other vehicles the appropriate percentage will increase by 1% for each of 2028/29 and 2029/30. The maximum percentage will therefore rise to 38% for 2028/29 and 39% for 2029/30.
The van benefit charge and car and van fuel benefit charges will increase by CPI, currently 1.7%, from 6 April 2025.
It was also announced that the government will act to close a perceived loophole in the rules for employee car ownership schemes.
The 100% first year capital allowances for zero emissions cars and electric vehicle charge points is to be extended to 31 March 2026 for corporation tax and to 5 April 2026 for income tax.
Our next look at announcements made in the Budget will be on the changes made to Inheritance Tax.
If you would like more information on any of the changes set out above and how these changes may impact you, please speak to our Tax Director, Jenny Marks.
To see our other news items please visit our Muras Baker Jones – Blog.