The Chancellor’s Spring Budget coincided with a challenging set of global circumstances. The collapse of Silicon Valley Bank just days prior emphasised the need for economic confidence, investment and growth here in the United Kingdom.

Coined as the ’back-to-work’ Budget, the Chancellor’s focus was on incentivising the skilled workforce to remain in work longer. Among incentives for working families, there was the £4 billion expansion of childcare to one and two year olds, and extension of the Energy Price Guarantee. Putting these announcements to one side, there were several changes to tax policy that are important to mention.

Trusts

The Chancellor announced that trusts and estates with income less than £500 will no longer pay income tax. This follows a 2022 HMRC consultation paper on income tax on low income trusts and estates, which first explored proposals to reduce burdens on trustees and personal representatives of low-income trusts and estates.

STEP participated in this consultation, and has long advocated for simplifying the tax system, such as supporting the implementation of a low amount for low-income trusts.

This measure is addressed through the government’s modernisation and simplification of the tax system. How income tax applies to low income trusts will be simplified from April 2024.

Trusts and estates with income more than the de minimis amount will be taxed on the full amount of this income, rather than the income only applying to the de minimis amount.

More information on income tax: Low income trusts and estates can be found here.

End of tax relief for non-UK charities

The government has announced it will change the tax definition of charities, meaning that only those within the jurisdiction of the High Court in England, Wales or Northern Ireland, or the Court of Session in Scotland will qualify for tax reliefs.

This restriction of charitable tax relief will take effect from next month. European Union associated charities that HMRC had previously accepted as qualifying for charity tax reliefs before 15 March 2023 will enter a transition period ending in April 2024. Treasury forecast a cost saving of £10 million a year after 2025 as a result of this.

Agricultural relief for inheritance tax

This Budget included the publication of HM Treasury’s consultation on taxation of environmental land management and ecosystem service markets. This consultation has not been highly publicised. The government is seeking views on the taxation of ecosystem service markets and the potential expansion of agricultural property relief from inheritance tax.

This consultation process will consider the extent to which the scope of agricultural property relief may pose a barrier, and as such explore potential updates to the scope of existing land habitat provisions.

The government will also consider a recommendation to restrict the application of 100% agricultural property relief to longer tenancies of eight or more years.

STEP will be following this consultation closely, particularly where potential updates to inheritance tax agricultural property relief are considered.

HMRC have published updated guidance on agricultural relief from inheritance tax, which you can read here .

The open consultation facilitated by HM Treasury, on taxation of environmental land management and ecosystem service markets can be read in detail here.

Ben Bell, Government Affairs Manager at STEP