Spring Budget 2024

The Chancellor delivered the last Spring budget of this on 6th March. 

In his speech, Jeremy Hunt said he was setting out to reward hardworking families with National Insurance tax cuts – leaving the average worker over £900 better off.  However, it remains to be seen as to whether the tax cuts have moved Tory sentiment in the polls.  History is not on their side.  

Winners and Losers of the tax changes are more complex than they first appear. Cuts from this Budget follow big tax rises – not least the six-year freeze to tax thresholds that are forecast to raise £40bn per annum. 

National Insurance will be cut again by 2p to 8% at the basic rate. This means that 27 million British workers will be paying just 8% of their earnings towards National Insurance. This is the second cut to National Insurance in as many Budgets; the Chancellor made the same cut as part of his autumn statement in November 2023, which began to take effect in January.  

As a result, the National Insurance rate will have fallen from 12% to 8%. This represents annual savings worth a total of £900 for the average worker earning £35,400, according to the Treasury. 

Class 4 NI contributions, which the self-employed pay on profits over £12,570 – will be cut from 9% to 6% on all profit between £12,570 and £50,270 will save approximately £1,050 annually. The rate remains at 2% on profits over £50,270. 

Further National Insurance changes set to take effect from April mean that around two million self-employed people will benefit from class 2 National Insurance being scrapped, saving them £192 a year.  

Currently, when a parent receiving child benefit begins to earn £50,000 or more, the amount of the benefit they get starts to reduce. For each £100 that parents earn over the £50,000 threshold, they must repay 1% of the child benefit they receive. By the time they earn £60,000, they have foregone all of the child benefit. 

The Chancellor announced that the £50,000 threshold at which parents begins to lose their child benefit will rise to £60,000.  This will be particularly good news for households with children that have seen their salaries rise above the threshold to keep in line with inflation.  Furthermore, the earnings threshold at which child benefit will be removed completely will rise from £60,000 to £80,000. This means that for each £200 parents earn over the new £60,000 threshold, they will only need to repay 1%, doubling the previous repayment of 1% per £100 over £50,000. This change is set to save – an average of £1,300 next year. 

The Chancellor also announced a broader overhaul of the child benefit system. From 2026, the amount of Child Benefit will depend on a total household income rather than individual income. 

Currently, landlords renting out a second home to tourists can benefit from Furnished Holiday Lets (FHL) relief.  This lets them deduct the value of their mortgage payments from the rent they receive, and that they paid Capital Gains Tax without the residential property surcharge of 8%. 

These tax breaks will come to an end with the end of the FHL Scheme.  It is estimated that the Treasury will raise £300 million with this move and that this will also help mitigate the housing crisis that has arisen in holiday destinations such as Cornwall and Devon. 

The Chancellor acknowledged that vapes aid people in quitting smoking. While he announced that a tax on vapes will be introduced from October 2026, he declared plans to hike tobacco duty simultaneously, so that people are still incentivised to quit smoking. 

The alcohol duty freeze will be extended until 1 February 2025.  The current level of fuel duty will also be frozen until August 2024. 

The Chancellor announced that a new British ISA will be launched, enabling you to invest in UK assets and pay no tax on the returns you make.  You will be able to save up to £5,000 per tax year in the British ISA, on top of the current £20,000 annual ISA allowance.  Details of this scheme have yet to be released, we will keep clients updated with any news. 

Currently, higher-rate taxpayers that sell a property are liable to pay 28% of profits above the £6,000 threshold in Capital Gains Tax. The Chancellor announced that this amount will fall from 28% to 24% from April 6.  The threshold, however, is also set to fall to £3,000 in the new tax year. 

State Pension – The state pension will rise by 8.5% in April and the triple lock remains, which will be a sigh of relief for pensioners otherwise missing out on the benefits that come from the NI cuts and Child Benefit changes.  

Abolition of Non-Domicile Regime – abolition of the remittance basis for income tax and capital gains tax for individuals under the (the “Non-Dom Regime”) will come into effect from 6 April 2025. It is proposed that this will be replaced with a new elective foreign income  and gains regime that will apply for the first four tax years of UK tax residence for individuals who have not been UK tax resident for the previous ten years.  There is also a proposal to reform Inheritance Tax to remove the connection with a person’s domicile and link it to residence instead since the concept of domicile will be dropped.