Our 2024 Spring Budget Round Up
The Chancellor of the Exchequer, Jeremy Hunt, announced his Spring Budget on Wednesday 6 March, and as with any budget, we like to condense it down to highlight the key parts that could affect you.
National Insurance
Mr Hunt announced that there will be further cuts to the rate of National Insurance paid on earned income effective from the 6th April 2024. Those that are employed currently pay a rate of 10% on earnings between the weekly threshold of £242 per week and £967 per week, but this is being cut by 2% to 8% which could save earners up to £754 p.a.
The applicable rate for self-employed individuals will fall from 9% to 6%. This takes into account the already proposed 1% reduction announced last Autumn, and the 2% announced yesterday. This is a total saving of up to £1,131 p.a. for the self-employed.
This is a welcomed change for all earners as they will naturally see a pay rise from April.
A British ISA
Whilst nothing has been implemented yet, the Chancellor announced that he will look to implement a new ISA that is targeted at investing in UK companies and will come with an additional allowance of £5,000. This won’t count towards the £20,000 ISA allowance currently in place.
There is no detail on what this actually entails in terms of what qualifies as a “UK company”, nor the underlying investments or features of the ISA.
Whilst the aim of the ISA is clearly one that is trying to be positive for UK growth, it’s important to not let tax advantages steer you away from investing in a globally diverse portfolio that is based on empirical evidence.
There is going to be a consultation on this and it will be open until the 6th June 2024, so it’s unlikely we’ll hear anything until this date.
Child benefit tax charge for high earners
Currently, families who claim child benefit where one of the parents earns over £50,000 are subject to a charge. This charge is currently 1% of the child benefit amount for every £100 of income that is above £50,000. So, if one parent earns £40,000 and the other earns £60,000, then this would result in a full reduction of child benefit.
From the 6th April 2024, the starting taper threshold will increase from £50,000 to £60,000, and the taper rate will be 1% for every £200 above £60,000. This means that someone earning £80,000 will then be subject to the maximum reduction.
The government will also look to introduce a household-based approach in April 2026 to assessing income, so a combined household income for parents is assessed, rather than the highest earner.
Capital Gains Tax (CGT) on residential property
Higher rate taxpayers currently pay a CGT rate of 28% on gains that arise from the disposal of a residential property. This is being cut to 24% from the 6th April 2024.
This will be a welcomed change for landlords who may be looking to sell their property.
It’s important to note here that CGT is not payable on your main residence, say if you move house.
Furnished holiday lets (FHL)
The 6th April 2025 will mark the end of the FHL regime. FHL’s are accommodations that are furnished and let out to holidaymakers, with the landlord benefited from certain tax reliefs. From 2025, they will be treated the same way as regular buy-to-let properties.
What this means from a pensions point of view is that the income that arises from FHL’s will no longer count as relevant earnings for pension contributions from the 6th April 2025.
Conclusion
Overall, it was a relatively quiet budget from the Chancellor, with the big changes being the cut to National Insurance for employees and the self-employed, a cut to CGT on residential property for higher rate taxpayers, and discussions around a British ISA.
There were some announcements in the Autumn Budget which will come into effect from the 6th April 2024 which we summarised for you here: https://wealth-experts.co.uk/autumn-statement-2023-report/.
We’d also like to remind you that the Lifetime Allowance will be abolished on the 6th April 2024. We will issue a separate article for this in due course.
As always, if you have any questions about what was announced, then please don’t hesitate to get in touch with one of the team.
