Personal finances – Spring Budget 2024

Published by Terry Burgum on 6 March 2024

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What do the various announcements made by Jeremy Hunt in his Spring Budget promoting lower taxes and higher growth mean for your personal finances?

National Insurance lowered to 2%

Since the Autumn budget further cuts have been announced to Employee and Self-Employed Main Rates of National Insurance.

This 2% reduction will directly benefit those in employment. Pensioners and those receiving income from other sources such as rental and dividend income, will not however receive any benefit from the change.

Employees earning between £242 to £967 weekly currently pay 10% National Insurance. Those earning between £12,570 and £50,270 annually will benefit, with a maximum increase of up to £62 per month in your net pay from the 6th of April.

Further reductions in Class 4 National Insurance will see the main rate for the self employed fall from its historic 9% to 6% from the 6th of April 2024.

With the additional abolition of the requirement to pay Class 2 National Insurance contributions, this is set to save the average self-employed person on £28,000, around £600 per year.

High Income Child Benefit Charge

Consultation was promised on the ongoing unfairness for families losing Child Benefit where one parent earns in excess of £50,000, whilst families with two parents earning up to £49,000 each retain the full allowance. This could involve moving the assessment of this charge from the individual’s income to a household income basis. However, this may take some time.

In the meantime, the threshold for adjusted net income over which you start to lose this benefit will change from £50,000 to £60,000, with the rate of the charge halved, meaning you now have to earn over £80,000 before you lose all benefit. Over 5 million families could save an average of £1,500 per year through this.

Creating more homes for long term lets

The abolition of the Furnished Holiday Lettings (FHL) tax regime and cuts in Capital Gains Tax (CGT) rates for second properties was announced to increase rental property availability.

The current regime offers a number of tax breaks against alternative long-term lettings.
Those operating unincorporated property rental business which include Furnished Holiday Lets, will soon lose many of the advantages of:

  • Tax relief at the highest marginal rate can be deducted from interest costs on loans from profits.
  • Claiming capital gains tax reliefs such as Business Asset Disposal Relief.
  • Benefitting from Capital Allowances on purchases of items such as furniture and fixtures.
  • Counting rental income as earnings to support tax relieved pension contributions.

If you have not already considered, it could be time to maximise pension contributions before this benefit is lost.

Those with investment properties have positive news, with the maximum rate for Capital Gains Tax on second properties being cut from 28% to 24%.

This is the optimum tax rate to maximise total tax revenue by increasing the number of property transactions according to the Lapper Curve.

Second property owners with unrealised capital gains could now be provided with the opportunity to exit with a lower tax liability.

Do not forget though, that the reduction in the Capital Gains Tax Allowance to £3,000 from 2024/25 will increase the amount of gain subject to the lower tax rate.

Promoting UK Equity Investment

Directives were announced to increase the level of investment in UK companies through pensions and investments.

This included a new ‘UK ISA’ with a £5,000 allowance, in addition to existing ISA allowances, to hold UK focused investments and increase tax-efficient investment opportunities.

In a bid to encourage investment in UK focused assets a requirement for Defined Contribution and Local Government Pensions to disclose the levels of investment between UK and International Equities was also announced. This could be a pre-cursor to the FCA reviewing requirements for this market sector.

New routes for government financing will become available through a new ‘British Savings Bond’ to be launched in April ‘24 through National Savings & Investments (NS&I), with a 3 year guaranteed fixed interest rate.

Abolition of the non-dom status

The ‘non-dom’ status – the tax regime for those that are resident in the UK but domiciled overseas will be abolished.

Those who come to live in the UK from overseas from April 2025 will escape UK Income Tax on their overseas income for the first 4 years after which they will pay the same level of tax as everyone else.

For those ‘non-doms’ already here, a 2 year transition arrangement will give them the opportunity and a tax incentive to onshore overseas assets and promote investment in the UK.

These changes are forecasted to raise £2.7bn in additional taxes annually.

Pensions

We heard recommitment to exploring Lifetime Providers for Workplace Pensions so an employee can have one pension for life that will travel with them as they move from job to job, but no further details were announced yet.

Remember though, the Lifetime Allowance will disappear on the 6th of April, replaced by the new Lump Sum & Death Benefit Allowance.

With changes to entitlements for tax-free cash and pension death benefits please do take advice when drawing benefits or planning future wealth transfers to ensure you achieve the best outcomes for your own individual circumstances.

To discuss your own personal circumstances please contact our Financial Planning team on +44 (0) 330 124 1399 or provide your details via our online enquiry form.

The content of this article is for information only and does not constitute formal financial advice. This material is for general information only and does not constitute investment, tax, legal or other forms of advice. You should not rely on this information to make, or refrain from making any decisions. Always obtain independent, professional advice for your own particular situation.

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