The 2024/25 tax year is just a month away, and Chancellor Jeremy Hunt has delivered his 2024 Spring Budget, outlining the government’s plans for the next fiscal year and beyond.
With a general election looming – Prime Minister Rishi Sunak has said he will call it before the end of the year – the Chancellor claimed that the government had met the Prime Minister’s three economic priorities laid out at the start of 2023, having:
- Halved inflation, down from highs of 11% last year to 4% in January 2024
- Kept debt falling in line with fiscal rules
- Grown the economy, fully 1.5 percentage points higher than expected.
Amid this backdrop, the Chancellor called this a “Budget for long-term growth”, with goals to “deliver more jobs, better public services, and lower taxes”.
Read on for a summary of some of the key measures and announcements from this year’s Spring Budget, and what they might mean for you.
National Insurance will be reduced by another 2%
Arguably the biggest announcement from the Chancellor’s Budget this year is that the main rate of Class 1 National Insurance contributions (NICs) will be reduced by a further 2%.
During the Autumn Statement in November 2023, the Chancellor reduced the main National Insurance rate by two percentage points, falling from 12% to 10% from 6 January 2024.
Now, this main rate will fall a further two percentage points to 8%. Meanwhile, the main rate of Class 4 self-employed NICs will fall to 6%. Both changes will take place from 6 April 2024.
According to the OBR, an employed individual with average earnings of £35,400 will save £450 a year thanks to this cut, and £900 when including the previous cut in November 2023.
Furthermore, there will be no further requirement to pay Class 2 NICs from 6 April 2024, as outlined in the 2023 Autumn Statement.
However, offsetting these tax cuts is the confirmation that the Income Tax Personal Allowance and tax bands will remain frozen until 2028.
As wage inflation increases, this could see many taxpayers pulled into a higher tax band over the next four years, an effect known as “fiscal drag”.
The High Income Child Benefit Charge will be reformed
Having been a contentious issue for some time, the Chancellor confirmed reforms to the High Income Child Benefit Charge.
This tax taper effectively reduces the amount received from Child Benefit for those earning £50,000 or more. Those earning £60,000 or more must repay all Child Benefit or opt out from payments entirely.
Crucially, this rule only applies to one higher earner per household. So, a household with one person earning £55,000 and the other £10,000 would be affected by the charge, while two people each earning £49,000 would not be affected at all.
So, by April 2026, the government will introduce a household income charge, assessing both earners’ income against the threshold, rather than just an individual higher earner’s.
Furthermore, from 6 April 2024, the £50,000 threshold will be raised to £60,000, and the top taper to £80,000. According to the government, this will see half a million families gain an average of £1,260 in 2024/25.
The higher-rate Capital Gains Tax charge for residential property transactions will be reduced
To promote the housing market and encourage more property transactions, the Chancellor announced a reduction in the higher rate of Capital Gains Tax (CGT) for gains on residential property, excluding main residences.
Under the current rules, the standard higher CGT rate is 20%, with a 28% rate applied to residential property transactions. This will be reduced from 28% to 24% from 6 April 2024, encouraging landlords and second-home owners to sell their properties, with the aim of increasing the housing supply for first-time buyers in particular.
The 18% charge for gains on residential properties made in the lower rate band will remain unchanged.
Other property related tax changes
The Chancellor announced the abolition of the Furnished Holiday Lettings (FHL) tax regime with effect from 6 April 2025, removing an incentive for landlords to offer short-term holiday lets rather than long-term residential lets.
He also announced the abolition of Multiple Dwellings Relief, a relief available when more than one property is acquired in a single transaction, in the Stamp Duty Land Tax regime. This change applies to transactions with an effective date after 1 June 2024, subject to limited exemptions.
Changes to pensions
As part of the Chancellor’s goal to channel more capital into UK equity markets, the government is working alongside The Pensions Regulator (TPR) and Financial Conduct Authority (FCA) on the “Value for Money” pensions framework to “ensure better value from defined contribution (DC) pensions, by judging performance on overall returns, not cost”.
This looks to address where pension schemes prioritise short-term cost savings at the expense of long-term outcomes, as well as where savers may be prevented from receiving value because of a scheme’s current scale.
The Chancellor also confirmed the government’s commitment to exploring a lifetime provider model for DC pensions, previously referred to as the “pot for life”. This would give pension savers the right to choose the pension scheme that their employer pays into, rather than being auto-enrolled into a scheme chosen by the employer.
Investments in UK-focused assets will be encouraged with the new “UK ISA”
As well as expanding pension investments into British businesses, the Chancellor intends to create a new UK ISA, offering an additional tax-efficient allowance of £5,000 for investment in UK-focused assets. This is another move that aims to channel more investment into UK equities.
This will be on top of the existing ISA allowance, which remains at £20,000 for the 2024/25 tax year.
Other key changes
Fuel and alcohol duty remain frozen
Fuel duty will remain frozen for another 12 months instead of increasing in line with inflation, and the 5p cut to fuel duty, originally set to expire on 23 March, has been extended for a further 12 months. Government figures claim that this tax cut will save an average car driver £50 in 2024/25.
Meanwhile, the alcohol duty freeze will be extended until February 2025, benefiting 38,000 pubs across the UK.
Tax rises will bolster the government’s coffers
While this Budget has seen many tax cuts, the Chancellor also announced measures that will see certain taxes increase.
Firstly, the government is abolishing the current tax system for UK non-doms, and replacing it with a “simpler and fairer” residence-based system.
From 6 April 2025, anyone who has been resident in the UK for more than four years will pay UK tax on foreign income and gains. In 2028/29, this will raise £2.7 billion.
There will be transitional arrangements for those who have already benefited from the previous system and new arrivals will not pay UK tax on foreign income and gains for the first four years of tax residence provided they have been non-tax resident for at least the previous ten years.
There will also be a new levy on vaping products from October 2026, raising £445 million in 2028/29. Meanwhile, to encourage vaping over smoking, tobacco duty will also increase in October 2026, raising a further £170 million in 2028/29.
Household support fund extended
There will be an extra £500 million to extend the Household Support Fund in England from April to September 2024. This fund provides support with essentials such as food and utilities to vulnerable households.
Full business expensing to be extended, and increases to VAT thresholds
After initially making full business expensing permanent in November 2023, the Chancellor announced plans to extend this to leased assets when fiscal conditions allow for it. Draft legislation is to follow.
The Chancellor increased the VAT registration threshold from £85,000 to £90,000, and the deregistration threshold from £83,000 to £88,000 from 1 April 2024.
Inheritance Tax changes
Plans have been announced to move to a residence-based regime for Inheritance Tax. These include consulting on a 10 year exemption period for new arrivals and a 10 year “tail-provision” for those leaving the UK. No changes will take effect before 5 April 2025.
From 1 April 2024, personal representatives of estates will no longer need to have sought commercial loans to pay inheritance tax before applying to obtain a “grant on credit” from HMRC.
Business Rates
An extension to the Empty Property Relief “reset period” from six weeks to thirteen weeks was announced with effect from 1 April 2024 along with consultation on a “General Anti-Avoidance Rule”. These measures are likely to significantly impact Business Rates mitigation arrangements in respect of empty properties.
The winners and the losers
We also take a look at All the winners and losers from the 2024 Spring Budget – RPG Chartered Financial Planners (rpgcfp.co.uk)
Get in touch
If you have any questions about how the Spring Budget will affect you and your finances, please get in touch with your usual RPG contact or email info@rpgcfp.co.uk or phone 0161 608 0000 for our Manchester office or 01745 582 933 for our St Asaph office.
All information is from the Spring Budget documents on this page.
The content of this Spring Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.
While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.
