On Wednesday, 6th March, the Chancellor of the Exchequer, Jeremy Hunt, delivered his Spring Budget 2024 to Parliament. The budget will likely be the last major fiscal event before the general election. In his ‘Budget for long term growth’, the main headlines we think you should know are as follows;
Tax
- Mr Hunt announced a second National Insurance tax cut from 10% to 8% from April, meaning the average worker will be £450 better off a year.
- The Chancellor also went further with tax cuts for the self-employed, reducing Class 4 NICs from 9% to 8%.
- A further 2p cut to Class 4 NICs for the self-employed to 6% will mean the average worker earning £28,000 will be £650 better off compared with last year.
- Mr. Hunt also announced that the High Income Child Benefit Charge will be assessed on a household basis by April 2026. A consultation will follow on achieving this and immediate support for working families by increasing the threshold to £60,000.
- Hunt says the government will reduce the higher property capital gains tax (CGT) rate from 28% to 24%.
- The Personal Savings Allowance and starting rate for savings will be maintained at their current levels.
- The CGT annual exempt amount will reduce to £3,000 (from £6,000) and the dividend nil rate of taxation will reduce to £500 (from £1,000) as at 6 April 2024.
Energy and Fuel
- Mr Hunt extends the energy windfall tax until 2029.
- The average car driver will save £50 this year as the 5p cut and freeze to fuel duty is maintained until March 2025.
Investments
- A new ‘British ISA’ will be introduced, allowing investments of up to £5,000 in British companies.
- A new ‘British’ savings bond is also to be launched through NS&I from early April 2024. It will offer a guaranteed interest rate on investments between £500 and £1million, fixed for a 3-year term.
Economy
- The OBR expects GDP to grow at 0.8% this year and 1.9% next year, higher than expected.
- After that, growth rises to 2.2%, 1.8% and 1.7% in 2028/9.
- Debt will fall to 94% of GDP by 2028/29.
- The VAT registration threshold will be increased from £85,000 to £90,000 from the start of April, saying it would help “tens of thousands of businesses”.
What does the Spring Budget 2024 mean for you?
The Spring Budget 2024 saw a few fundamental changes, but this wasn’t anything compared to last year’s. But what does this mean for your finances? We delve a little deeper into the details.
Tax cuts
In simple terms, a reduction in National Insurance will mean more money in around 27 million worker’s pockets – saving the average £450 a year when combined with the 2% cut that was already introduced from January.
The Chancellor announced a few changes that will affect property investors, designed to help ‘encourage landlords and second home-owners to sell properties, making more available for buyers’. The changes in property capital gains tax is to be reduced from 28% to 24% – whilst on the face of it this is a tax cut, the government expects this will actually increase tax revenues by encouraging people to sell their second homes.
For those that are considering releasing a property gain or are presently in the process of this, it may be worthwhile investigating if this can be delayed until the beginning or the 2024/25 tax year.
Property tax reforms
Despite what was rumoured, no significant changes were made to stamp duty land tax for first-time buyers or people downsizing. However, the government is to abolish multiple-dwellings relief from June 2024. This relief applies when someone buys more than one property in the same transaction, for example several flats in a block.
Currently, buyers can pay stamp duty based on the average price of the individual properties they purchase, rather than the total cost of the transaction – thereby reducing their tax bill. But from June, it will be based on the total cost.
From April 2025, the furnished holiday lettings tax regime will also be abolished. The current rules allow those letting out furnished holiday properties to offset mortgage interest, claim CGT reliefs and deduct the cost of furniture when calculating their tax bill. The government says removing this tax advantage will encourage more landlords to let properties to longer-term tenants.
The Budget also included details of new and ongoing housebuilding projects – the government says it is on track to deliver 1 million homes within this parliament.
Tax allowances
Despite key tax allowances either being ‘frozen’ or reduced, as financial planners, our job will continue to ensure that these are made use of where possible. Where savings or investments are being allocated, we will want to consider the most appropriate products to help facilitate this.
New ‘British’ investments
Two big changes were unveiled to encourage more investment into UK companies and boost economic growth.
The first is a new ‘British’ ISA with a £5,000 allowance – this would be in addition to the current ISA subscription limits of £20,000 per person. There is a consultation open until 6th June which will decide the types of investments that should be held (such as UK company shares, corporate bonds and gilts) and there is no set timescale for its launch. Whilst the tax-efficiency offered by a new ISA product is valuable, it is important to consider the impact a bigger allocation to the UK market may have on investment returns.
The second is a new ‘British’ savings bond to be launched through National Savings & Investments (NS&I). This is expected to be available from early April 2024. It will offer a guaranteed interest rate (as yet unknown) on investments between £500 and £1 million, over a three year term. Any money held with NS&I is fully secure as it is 100% backed by the UK Treasury.
Cost of Living
Paul Johnson, director of the Institute for Fiscal Studies think tank, says that people who earn between £25,000 to £50,000 will be better off after the latest 2p cut in National Insurance.
Mr Hunt stated he would increase the time to repay a new loan from 12 months to 24 months for the poorest of families. He also will abolish the £90 charge for a debt relief order.
Pubs, breweries and distilleries will benefit from a further freeze on alcohol duty until February 2025.
Hunt says rates paid to nurseries to fund free childcare hours for parents of children over nine months will continue for the next two years.
Want to know more?
Fill in the form below to download our comprehensive guide on the 2024 Spring Budget:
In the meantime, if you have any questions about your finances or how the budget changes affect your situation, please get in touch with one of our team.
Sources:
https://www.theguardian.com/uk-news/2024/mar/06/budget-2024-key-points-jeremy-hunt
