We outline the key points from the Spring Budget that may affect your tax bill on your income, savings, property and lifestyle.
We may not know when a General Election will be, but it’s likely that the Spring Budget on 6th March was Chancellor Jeremy Hunt’s last major announcement before the big day. The rumours about a cut in National Insurance proved to be right, but there was no mention of inheritance tax, and a new ISA product was a surprise headline grabber.
Here are the main points that may affect you and your family.
Income
- The main National Insurance (NI) rate , which was already reduced to 10% in January, will be cut by another 2p, dropping to 8% from April. For someone earning £35,000 a year, these combined cuts represent an annual tax cut of £900, and around £1,500 a year for higher earners.
- For self-employed workers, the NI rate falls to 6% instead of the previously planned 8% in April. Together with the abolition of Class 2 NI announced last autumn, this saves £650 a year for someone earning £28,000.
Savings
- Hunt introduced the Great British ISA (GB ISA) to "encourage more people to invest in UK assets". This will allow an extra £5,000 to invest in UK equities on top of the current £20,000 tax-free allowance. However, the government wants to consult on this first, so it may be some time before it’s available.
- National Savings and Investments (NS&I) are set to offer a three-year British Savings Bond from April. No word on the interest rate for that yet, though.
Property
- The higher rate of capital gains tax on residential property drops from 28% to 24% in April.
Other measures were designed to collect more taxes from holiday home and second homeowners:
- The stamp duty tax break on multiple dwellings to be abolished from June.
- Scrapping of tax relief for furnished holiday lets, including capital allowances and eligibility for pension contributions.
Read about other recent tax changes targeting buy-to-let owners.
Other measures
- The 3% rise in alcohol duty is postponed until February 2025.
- The “temporary” 5p-per-litre fuel duty cut, due to run out this month, is extended for another 12 months, saving the average driver £50 over the year.
- Increase in air passenger duty for non-economy travel.
- The income threshold for child benefit goes up from £50,000 to £60,000.
- Shake up of the ‘non-dom’ regime – from April 2025, the concept of ‘domicile’ will effectively be abolished, as anyone living in the UK for four years or more becomes liable for UK taxes.
Already lined up for April
From 6th April, measures are coming in that had already been announced last year – some good…
- The State Pension goes up 8.5%, making the full weekly rate for those on the new pension £221.20 (an extra £902 a year), or £169.50 for those on the old structure (£692 more a year).
- The 25% or 55% charges for breaching the pension lifetime allowance (LTA) were removed in 2023, but from April the limit is abolished altogether
- Benefit payments will increase by 6.7% and the National Living Wage lifts.
…others not so good:
- Having been frozen until 2028, the thresholds for income tax and inheritance tax allowances stay the same.
- The dividends tax-free allowance will be halved again from £1,000 to just £500.
- The annual exemption for capital gains tax also halves from £6,000 to £3,000 per person
Get ready for the new tax year
When there are frozen and reduced thresholds, there’s more chance of income and profits dragging you into a higher tax bracket or exposing a greater proportion of your income to tax. The Office for Budget Responsibility (OBR) estimates that, by 2028, around 2.7 million people will move into the higher bracket and 600,000 more will pay the 45% additional rate of income tax.
Make sure you minimise the impact of this ‘fiscal drag’ by maximising all the available allowances and reliefs for 2023/24 and getting your finances match-fit for the year ahead.
If you’d like to book in a financial planning review, give us a call.