It’s that time of the year again… It’s been called the “Super Bowl” of personal finance in the UK, (And it is! Well… kind of). As a reminder, the Spring Budget is the chance for the Chancellor of the Exchequer (currently Jeremy Hunt) to provide a bit of an update on the UK’s finances, and propose changes to tax rates, financial products and government spending.
While we may not quite see it as the same as the Super Bowl, it is INCREDIBLY important for your personal finances. The changes made can result in more or less money in your pocket, which could mean retiring years earlier or later than you plan to.
This was a hotly anticipated one, as it’s really the Conservative Party’s final chance to announce major changes, which could influence people’s vote in the general election, which is likely to be later this year.
In this article we’ll focus mostly on those changes which will have an impact on your savings, income or financial plans.
So, let’s get into the details around how this actually impacts your wallet.
National Insurance Rates reduced by 2p for employed, and 3p for self-employed.
- The main rate of Class 1 employee NICs will be reduced by 2p from 10% to 8% from 6 April 2024. This is in addition to the 2p cut announced at Autumn Statement 2023 with effect from 6 January 2024.
- The main rate of Class 4 NICs, paid by self-employed earners, will be reduced by 3p from 9% to 6% from 6 April 2024. This replaces the cut to 8% announced during the Autumn Statement 2023.
Increased threshold for the High Income Child Benefit Charge
- The government will raise the threshold for the High Income Child Benefit Charge from £50,000 to £60,000 from 6 April 2024, and there will be a tapered charge between £60,000 and £80,000. The government will also consult on moving to a household-based system rather than one based on individual incomes from April 2026.
British ISA and British Savings Bonds Launched
- The government announced the launch of a new British ISA. The British ISA will be a £5,000 allowance in addition to the existing ISA allowance and will be a new tax-free product for people to invest in UK-focused assets. The £5,000 is in addition to the current £20,000 allowance per tax year, bringing the total allowance to £25,000 across Cash ISAs, Stocks and Shares ISAs, LISAs, and the British ISA.
- The chancellor also announced a new product – British Savings Bonds. This is a choice of 2 types of 3-year fixed-rate bonds offered by NS&I. NS&I’s Guaranteed Growth Bonds will add interest to the bond each year so that it grows in value over time. And their Guaranteed Income Bonds will pay you interest to your bank account every month. They offer a guaranteed return over 3 years for investments between £500 and £1 million. They’ll be available from April 2024.
Capital Gains Tax reduced for residential properties
- The government will reduce the higher rate of Capital Gains Tax on residential properties from 28% to 24% from 6 April 2024. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band.
Abolishment of Non-domiciled Tax Regime
- From 6 April 2025 the government will introduce a new residence-based regime.
- Under the new regime, anyone who has been a tax resident in the UK for more than four years will pay UK tax on their foreign income and gains, regardless of their domicile status, with a four-year relief for new arrivals (provided they have been a non-tax resident for the last ten years).
There were no changes to income tax rates – income tax bands remain frozen. So if you get a pay rise in line with inflation, this may push you into a higher tax band where you may end up paying more in income tax every month.
It’s also worth mentioning that the Household Support Fund, which was introduced by the government in 2021 to help families struggling with the cost of living, has been extended by six months.
