We’ve just had our latest budget and it felt like a government trying very hard to provide some help for the public in an election year! There wasn’t a huge amount of surprise in this budget, which isn’t surprising considering the general consensus is that the public finances are still tight.
Below are the main points…
National Insurance Contributions (NICs)
Jeremy Hunt announced a cut in Class 1 NICs (employed), from 10% to 8% from 6 April 2024. He also announced a cut in Class 4 NICs (self-employed) from 8% to 6%.
For employees on a salary of £35,400, this means a tax cut of around £900 a year. For a self-employed person earning £28,000, this equates to a tax cut of around £650 a year.
This is fairly large giveaway that will affect a large amount of people. According to the Treasury, these cuts to NICs mean that a person on an average wage now has the lowest effective personal tax rate since 1975 (according to the Spring Budget document published by the Treasury).
Pensions
The below limits apply to pensions for the 2024/25 tax year…
- Lump sum allowance: £268,275
- Lump sum and death benefit allowance: £1,073,100
- Annual allowance: £60,000
- Money purchase allowance: £10,000
- Tapered annual allowance: £260,000
Capital Gains Tax (CGT)
The higher rate of CGT for residential property disposal is cut from 28% to 24%. The lower rate remains at 18% for any disposals falling within basic rate.
Child Benefit
From 6 April 2024, the High Income Child Benefit Charge will apply to households that have one person who earns over £60,000 per annum, tapering the benefit received down gradually up to earnings of £80,000. Previously, you started to lose Child Benefit between £50,000 and £60,000 per annum, so this is a big change.
The intention is to move to a system based on household income rather than individual incomes by April 2026.
Individual Savings Accounts (ISA)
The government will be launching a new “UK ISA”. This will be an ISA allowance of £5,000 (in addition to the existing allowances) as long as the money is invested exclusively in UK firms. The government will be consulting on the details.
National Savings & Investment (NS&I)
NS&I will launch a British Savings Bonds product that will offer a guaranteed interest rate, fixed for three years.
Freezing duties
The chancellor extended the freeze on alcohol duty and the temporary cut in fuel duty.
VAT
The VAT threshold is increased to £90,000.
State pension
The state pension triple lock is maintained.
Holiday lets
The chancellor intends to abolish the Furnished Holiday Lettings tax regime from April 2025. This means short and long-term lets will be treated the same for tax purposes.
Fiscal drag
The chancellor maintained the freeze on tax thresholds (with capital gains and dividend allowances falling as previously announced). As earnings increase, this will mean that more people start to pay tax, or drift into higher rate tax. This means higher tax bills without actually putting tax rates up.
All in all, it felt like a fairly benign budget from a financial planning point of view, very much with half an eye on an upcoming election… If you have any questions, please do get in touch.
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