The Spring Budget 2024 -the key points for your financial planning.

The spring budget 2024 worst-kept secret saw a reduction in National Insurance contributions.

This was despite the early speculation that the Chancellor may cut income tax. Instead, he chose to cut National Insurance’s rate by 2% – a move to help workers specifically.

There were no significant announcements on pensions.

The abolition of the lifetime allowance (the maximum you can save in your pension) has already been confirmed.

Also, there was no mortgage help for first-time buyers, despite rumours of a 99% Government-backed mortgage.

Here are some of the Spring Budget 2024 key points:

National Insurance

Following fast in the footsteps of cuts to NI announced in the Autumn Statement, the Chancellor has announced a further 2% cut.

Employees
The main rate (Class 1) will be cut by 2%. The new rate of 8% will give a maximum saving of £754 pa (£37,700 x 2%).

This will take effect on April 6.

Self-Employed

Class 2 NI will be abolished for those with annual profits exceeding £6,725.

Self-employed also pay Class 4 NI contributions on profits between the lower and upper profits limit (up to £37,700).

From April, this will be cut by a further 2% on top of the 1% reduction announced in the Autumn Statement. The primary rate will, therefore, drop from 9% to 6%, representing annual savings of up to £1,131.

Employer
There were no changes to employer rates of NI, which will remain at 13.8%.

What does this mean:

You will have more money in your pay packet. This may help you deal with other priorities. For those not relying on the cut, you could put more in your savings and pension plans.

Pensions.

No new changes were announced affecting pensions in the Spring Budget 2024

We have already begun to deal with the abolition of the Lifetime Allowance (LTA, the maximum amount you can save in a pension fund).

New allowances in April 2024 will replace the LTA.

  • The Lump Sum Allowance (LSA) caps the tax-free cash that can be taken and is set at £268,275 for those without protection.
  • The Lump Sum and Death Benefit Allowance (LSDBA) places a cap on tax-free lump sums paid during the member’s lifetime and on death before age 75. It has been set at £1,073,100 for those without protection and is reduced by any LSA used.

State Pensions

It was confirmed that the State Pension will continue to increase by the Triple Lock mechanism, taking the weekly income for those eligible to £221.20 from April.

UK ISA consultation

A new ‘UK ISA’ is to be introduced to support UK investment. This will give savers an additional annual subscription allowance of £5,000 on top of the existing £20,000 limit.

Consultation on the design and implementation of the ISA will be open until June 6, 2024.

What does this mean:

Along with the new ISA changes that have already been announced in April, read more here. The consultation includes proposals to ensure a new ISA allowance is not open to abuse.

These involve restricting or disincentivising holding cash and barring transfers from the UK ISA to another type of ISA.

There is no set timescale for the launch of the UK ISA, and one of the questions asked in the consultation is how long it would take providers to deliver an appropriate product.

Tax efficiency is attractive, but restricting investments to the UK may have a bigger impact on the investment return.

It’s also worth remembering that in 2020/21, over 11 million ISAs were subscribed to, but only 21% of people actually subscribed over £15,000. The UK ISA will benefit only 79% of ISA investors.

NS&I British Savings Bonds

The government announced that National Savings & Investments (NS&I) will launch a new product offering consumers a guaranteed interest rate, fixed for three years. The product will be available from early April 2024.

What does this mean?

British Savings Bonds are three-year fixed-rate issues of NS&I’s Guaranteed Growth Bonds and Guaranteed Income Bonds. They offer a guaranteed interest rate (as yet unknown) for investments between £500 and £1 million.

The big question is what interest rate will apply, but one of the good things about NS&I is that because you’re effectively lending to the government, the money is secure and 100% backed by HM Treasury.

Income tax

The budget announcement did not deliver on speculation of an income tax cut, leaving rates and allowances unchanged. See what the allowances are for the 2024/25 Tax Year.

Reforming child benefits

The highest earner in a household currently determines child benefit. They are subject to a tax charge that withdraws the benefit at a rate of £1 for every £100 earned over £50,000. This results in the complete withdrawal of child benefit for families when the high earner’s income exceeds £60,000.

From April 2024, the threshold at which child benefit is withdrawn will increase from £50,000 to £60,000, and the rate of withdrawal will be £1 for every £200 of income.

Child benefit will, therefore, be extinguished once the highest earner’s income exceeds £80,000.

What does this mean:

Some people may have stopped receiving child benefits due to the tax charges. They may now wish to restart as they will have a lower charge or be free of the charge altogether.

Capital gains and residential property

The Chancellor has announced a cut to the rate of CGT payable on the disposal of residential property, which will benefit multiple homeowners and those with buy-to-let properties.

The higher residential property CGT rate is to be cut from 28% to 24% starting April 6, 2024.

What does this mean:

Simply put, higher-rate taxpayers, or those with gains that push them into the higher tax rate, will have less tax to pay.

Potentially, a handy saving of £400 per £10,000 of residential property gain in the higher rate of tax.

It is also important to remember that, as previously announced, the annual CGT exempt amount will fall from £6,000 to £3,000 on April 6.

Furnished holiday lets

Furnished holiday lets will be taxed in the same way as buy-to-let properties from April 6 2025.

This will mean that income from furnished holiday lets will cease to be relevant to UK earnings for pension purposes.

Changes to the taxation of non-UK domiciles

It was announced that, from April 6, 2025, the remittance basis of taxation for non-UK-domiciled (people whose primary residence is not in the UK) individuals will be abolished.

This will be replaced with a new Foreign Income and Gains (FIG) regime determined by UK residency rather than domicile.

There will also be a consultation on changes to inheritance tax for non-UK doms.

Inheritance tax

No changes to inheritance tax were announced in the Spring Budget 2024. The nil rate band will remain frozen at £325,000, and £175,000 for the residence nil rate band.

Corporation tax

There were no further changes to the rates and thresholds.

VAT Threshold

The VAT threshold for businesses will increase to £90,000.

 

If you have any questions about the above changes and need advice or guidance, please get in touch with us.