The Chancellor's Spring Budget on the 6th March 2024 unveiled a roadmap for the UK's finances, but what does it mean for you? We discuss yesterday's key announcements and how they might impact your finances.
The annual Spring Budget offers insight into the government's priorities and plan of action for the upcoming year. It outlines how they intend to spend money, shares economic forecasts, and often includes changes to taxes which is traditionally a key talking point. Because of this, the statement can have a significant impact on individuals and businesses alike.
The Budget this year held particular weight. With a general election on the horizon, recession underway, and inflation squeezing everyone's income, Chancellor Hunt wasn't simply delivering a financial statement; he was hoping to announce measures that would resonate with voters in this challenging economic climate.
Mr. Hunt emphasised "budgeting for long-term growth" speaking optimistically about inflation projected to dip below 2% soon. However, the question remains: will his strategies be enough to maintain economic growth and spark voter confidence?
Summary: Key announcements from the 2024 Spring Budget
Reduced National Insurance Contributions (NICs)
The debate surrounding whether the Chancellor would prioritise a National Insurance cut vs. an Income Tax cut was a focal point of discussions leading up to the announcement -both options holding significant implications for taxpayers.
The standout announcement of the Spring Budget was in fact a reduction in the main rate of National Insurance Contributions. Effective from the 6th of April, there will be a 2% decrease in Employee NICs, bringing the rate down from 10% to 8%. Similarly, Self-employed NICs will also undergo a reduction, dropping from 8% to 6%.
While this move aims to provide relief for working individuals, with thresholds frozen until 2028, there is a concern that people's salaries will still be pushed into the higher tax band despite the cuts.
High Income Child Benefit Charge (HICBC) Reforms
From this April, the High Income Child Benefit Charge threshold will see a significant increase from £50,000 to £60,000, providing relief for more families. This adjustment will result in a higher threshold at which parents will begin to pay the HICBC, allowing more households to benefit from child benefits without being subjected to additional charges.
Looking ahead to April 2026, there are plans to assess the HICBC based on household income rather than individual earnings. This shift towards a household-based system could potentially benefit families with varying income sources, offering a more inclusive approach to determining eligibility for child benefit payments.
Changes to Property Taxation
The Chancellor's approach to property taxation in the 2024 Spring Budget seemed to be a mix of giving and taking. On one hand, there was a reduction in the higher rate of Capital Gains Tax on residential property disposals, dropping from 28% to 24% from the 6th April 2024. This move will be welcomed by property owners looking to sell, as it means a lower tax burden on their profits.
However, on the other hand, the Budget saw the scrapping of tax relief for furnished holiday lets from April 2025. This change could have significant implications for individuals who own holiday rental properties, as they would no longer benefit from the tax breaks previously available to them.
Mr. Hunt also announced the end of the Multiple Dwellings Relief from June.
Non-Dom Tax Status Scrapped & Replaced
Non-Dom Tax Status has been scrapped and replaced with a residency-based system, effective from April 2025. Under this new system, individuals who are new arrivals to the UK will not have to pay tax on foreign income for a period of four years, provided they have been 'non-tax resident' for the previous ten years
By offering this tax exemption on foreign income, the UK government hopes to position itself as an attractive destination for individuals looking to establish residency and contribute to the country's growth and prosperity. This move aligns with the Chancellor's vision of promoting long-term economic growth and ensuring that the UK remains competitive on the global stage.
Introduction of a new UK Individual Savings Account (ISA)
The introduction of a brand new UK individual savings account marks a step in reforming the ISA system, offering investors opportunities for tax-free investments. The new UK ISA will have an annual allowance of £5,000 in addition to the existing £20,000 ISA limit.
A consultation paper on the new individual savings account has been published, with specific details to be confirmed soon.
The Chancellor also announced a new British Savings Bonds.
Freeze on Fuel & Alcohol Duty
In a move to ease financial pressures, the government announced an extension of both the fuel duty freeze and the alcohol duty freeze.
Fuel duty will remain unchanged for another year until March 2025, meaning the previously implemented 5p cut will continue. This is estimated to save the average driver £50 this year.
Alcohol duty will also be frozen until February 2025, extending the initial six-month freeze announced last Autumn. This benefits not only consumers, who can expect slightly lower prices on alcoholic beverages, but also pubs, breweries, and distilleries who may see some stability in their industry.
VAT Registration Threshold Increased
The decision to increase the VAT registration threshold from £85,000 to £90,000 starting on the 1st April 2024 marks a significant shift in tax policy, being the first adjustment in seven years. This effort is geared towards offering relief to small businesses and entrepreneurs, allowing them to operate more freely without the burden of reaching the previous threshold.
It should also be noted that the VAT deregistration threshold will also increase, rising from £83,000 to £88,000.
The Growth Guarantee Scheme
The Chancellor announced the extension of the Recovery Loan Scheme, which has been rebranded as the Growth Guarantee Scheme. It will receive an additional £200 million in funding and the scheme will run until the end of March 2026.
The Growth Guarantee Scheme helps small and medium-sized enterprises (SMEs) by providing a government guarantee on loans up to £2 million. This essentially reduces the risk for lenders, making it easier for SMEs to access the financing they need.
Full Expensing for Leased Assets
The upcoming weeks will see the government release draft legislation that outlines the extension of full expensing to leased assets. Currently, leased assets are excluded from both full expensing and the 50% first-year allowance for special rate assets.
The implementation date for this change is still to be confirmed.
New Excise Duty on Vaping Products
The Chancellor announced the introduction of a new excise duty on vaping products starting from October 2026. Alongside this measure, there will also be a one-off increase in tobacco duty.
Tax Relief for Creative Industries
The Chancellor delivered a boost to the UK's creative industries announcing a £1 billion package of tax reliefs which will be rolled out over the next five years. This aims to achieve two key goals: firstly, to stimulate investment within the British creative sector itself, and secondly, to make the UK a more attractive destination for international production companies.
His statement included additional support for independent films through the
the audio-visual expenditure credit (AVEC), as well as the permanent increase of government support for theatres, orchestras, museums and galleries with tax relief rates going up to 40% and 45% depending on the production.
Taking action after the Spring Budget:
Get the facts - To start post-Budget planning, you'll first need to gather accurate and comprehensive information about the announcements. Consider reaching out to your accountant or financial advisor who can provide personalised advice. They can help you understand how the new measures might impact your investments, tax liabilities, and overall financial strategy.
Assess your personal finances - Once you understand the Budget's key announcements, it's time to take a look into your financial situation. This could mean examining your current budget and spending habits, assessing your financial commitments such as loans or investments, and pinpointing areas where the Budget changes may bring opportunities or require adjustments.
Take Action and Adapt: Now that you've evaluated what the impact of the Budget means for your personal and business finances, it's time to put that knowledge into action! This could involve tightening things up a bit or maybe even freeing up some extra cash depending on changes to your income or taxes. Remember, the best financial plans are flexible. Be open to adjusting your approach as you learn more or new opportunities unfold.
Looking at the road ahead...
The 2024 Spring Budget has set the stage for the year ahead, but the full impact of the Chancellor's announcements will continue to unfold over the coming weeks. By familiarising yourself with these initial changes, you can take charge and proactively plan your finances.
As always, further details will continue to develop following yesterday's statement and this summary simply serves as a guide to some key points. Remember to stay informed, assess how the Budget might affect you personally, and adapt your financial strategy as needed.
We recommend seeking further consultation on any questions you may have regarding the 2024 Spring Budget and encourage you to get in touch with our team.
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