2024 Spring Budget Wrap-up

An unsurprising yet theatrical pre-election “low tax, high growth” budget from what could be the final (or penultimate) statement from Jeremy Hunt as Chancellor. There are no changes of note to pension allowances (a relief given the big changes announced this time last year) and no inheritance tax surprises. We may see more significant changes in these areas following the general election.

Here are some of the key takeaways that we believe may be relevant – some more interesting than others…

• The OBR (Office for Budget Responsibility) forecasts headline inflation to fall to its 2% target in Q2 2024, which is likely to take pressure off further interest rate rises, and this should in turn be good for investment markets.
• The UK economy is set to grow by 0.8% this year and by 1.9% in 2025.

A new ‘British ISA’ is proposed and would provide an additional £5,000 ISA allowance, on top of the existing £20,000 ISA allowance, for investment in UK companies to support domestic growth. This will be under consultation until June 6, 2024, and so will not affect ISA allowances in the current 2023–24 tax year. It will be interesting to see what this will look like in practice and what investments will qualify under the British ISA allowance – for example, whether UK-listed multi-national companies (as found in the FTSE 100) will qualify.

There will be further cuts to National Insurance Contributions (NICs). From April 6, 2024, the main rate of class 1 NICs (employees) will fall from 10% to 8%, and the main rate of class 4 NICs (for self-employed individuals) will fall from 8% to 6%. The OBR translates this into an annual reduction of £450 for an average employee and £350 for an average self-employed individual. This may prove less popular than the previously mooted reduction in the basic rate of income tax, which would have been simpler to understand.

Higher-rate taxpayers are currently subject to 28% CGT on the sale of residential property (excluding main residences). This rate will fall to 24% on April 6, 2024, under the premise of increasing tax revenue for the Treasury through a higher volume of property transactions. This may lead to in-progress sales of investment and second properties now being deferred until April 6th, although the individual CGT allowance reduces from £6,000 to £3,000 from April 6th, meaning that some may be more keen to complete transactions this tax year. There is no change to standard CGT rates applicable to other assets, which remain at 10% for basic rate taxpayers and 20% for higher rate taxpayers.

From April 2024, the high-income child benefit tax charge threshold increases from £50,000 to £60,000. The taper rate at which the child benefit is clawed back will be spread out over £20,000 of adjusted net income, meaning that one needs to earn £80,000 or more to lose the full entitlement to child benefit.

Tax reliefs for furnished holiday lets will be abolished on April 6, 2025. This removes tax advantages for those letting furnished property over short periods and levels the playing field for longer-term landlords and tenants.

As ever, do get in touch if you have any questions.

Go Well,

Featherstone