6 key points from the Spring Budget that have now come into effect and what they could mean for you

In March, chancellor Jeremy Hunt delivered his 2024 Spring Budget, outlining the government’s plans for this fiscal year and beyond.

The Budget is an important event as it can have a significant effect on your finances. Now that the new tax year has commenced, many of the announcements that the chancellor made have come into effect.

Below, I’ve summarised six key points that could affect you and your finances this tax year and possibly beyond. Read on to learn more.

1. The main rate of National Insurance has fallen by a further 2%

On 6 April 2024, the main rate of Class 1 National Insurance contributions (NICs) fell to 8%. This extended the 2% reduction that the chancellor announced in the Autumn Statement, meaning that the main rate has fallen by a total of 4% in the past 12 months.

Additionally, the main rate of Class 4 self-employed NICs has fallen to 6%.

The BBC reports that an employee on an average salary of £35,400 will save £450 a year as a result of the cut, and £900 when including the previous cut in November 2023.

In 2024/25, there is no requirement to pay Class 2 NICs, as outlined in the 2023 Autumn Statement.

It’s important to remember, though, that lower rates of NICs don’t necessarily mean you will pay less tax moving forward. The Income Tax Personal Allowance of £12,570 and tax bands will remain frozen until 2028. A process known as “fiscal drag” means that, as wages increase, you could be pulled into a higher tax band during the next four years.

2. The government has pledged to reform the High Income Child Benefit Charge

If you’re a high earner and you have children, you’ll likely be aware of the High Income Child Benefit Charge.

The charge is a tax taper that reduces the amount you can receive from Child Benefit if you or someone in your household earns £50,000 or more. If your earnings exceed £60,000, you must repay all Child Benefit or opt out from payments entirely.

The charge is controversial because it only applies to one higher earner per household. So, if you or your spouse earn £52,000 while the other earns £10,000, you would be affected by the charge, but if you were each earning £49,000, you wouldn’t be affected.

In the first instance, the chancellor has increased the £50,000 threshold to £60,000, and the top taper to £80,000, effective from 6 April 2024.

Further to this, the government will replace the existing High Income Child Benefit Charge with a household income charge by April 2026. The new rules would assess both earners’ income against the threshold, rather than assessing each individual separately.

So, if your family is subject to the High Income Child Benefit Charge, or could be in the future, this change might enable you to keep more of the benefit.

3. The higher rate of Capital Gains Tax for residential property transactions has fallen

The chancellor has reduced the higher rate of Capital Gains Tax (CGT) for gains on residential property, excluding main residences. The government hopes that this will encourage more property sales and boost the housing market.

Previously, the standard higher CGT rate for residential properties was 28%. Since 6 April 2024, the rate has fallen to 24% if you sell your property as a landlord or second homeowner. The chancellor hopes this will increase the housing supply, particularly for first-time buyers.

Gains made in the basic-rate band will continue to be taxed at 18%.

While there may still be CGT to pay if you sell a property that isn’t your main home in 2024/25, the reduced higher rate could make the sale more tax-efficient for you than it would have been otherwise.

In addition to this, the chancellor has abolished the Furnished Holiday Lettings (FHL) tax regime, which provided a tax incentive for landlords to offer short-term holiday lets over long-term residential lets, and the Multiple Dwellings Relief, a bulk purchase relief in the Stamp Duty regime.

So, if you’re a landlord, the tax savings you may have experienced from the CGT rate reduction may be offset by the abolition of these tax regimes.

4. The government has replaced the UK non-dom tax system with a residence-based system

The chancellor has introduced a new residence-based tax system for UK non-doms. Under the new system, you’ll pay UK tax on any foreign income and gains if you have been a resident in the UK for more than four years and a non-tax resident for the last 10 years.

If you are already in this position, transitional arrangements may apply.

This new system replaces the previous system that was in place, and the government expects that this will raise £2.7 billion in 2028/29.

5. The government is working with regulators to change the way defined contribution pensions are invested

The chancellor aims to direct more capital into UK equity markets, and one of the ways he’s doing this is by reviewing the way defined contribution (DC) pensions are invested.

He’s working alongside The Pensions Regulator (TPR) and Financial Conduct Authority (FCA) on the “Value for Money” pensions framework to “ensure better value from DC pensions, by judging performance on overall returns, not cost”. This definition means that pension schemes are more likely to prioritise the long-term outcomes from your pension in the form of positive returns rather than cutting costs for the short term.

The FCA will help the government increase UK equity allocations in DC pensions, ensuring greater transparency about how pension schemes, including Local Government Pension Schemes, are investing their funds.

The chancellor also referred to the “pot for life” scheme first mentioned in the 2023 Autumn Statement, reaffirming the government’s commitment to developing this.

At present, employees who meet certain criteria are auto-enrolled in a scheme of their employer’s choosing. But, if implemented, the pot for life initiative would mean that employers are obliged to pay employee pension contributions into a scheme of the employee’s choosing.

6. The government is consulting on a proposed “UK ISA”

Another action that the chancellor hopes will raise more investment in UK equities is the “UK ISA”. The chancellor announced the development of a new UK ISA offering a tax-efficient allowance of £5,000 for investment in UK-focused assets.

The £5,000 UK ISA allowance would be in addition to the existing ISA allowance (which is £20,000 for the 2024/25 tax year), provided savers are using it to invest in UK equities. If rolled out, this would boost the amount of tax-efficient investments you can make each tax year.

Get in touch

If you’d like to know more about how the updates announced in the Spring Budget could affect your wealth, please get in touch.

Email Marnel.Stafford@fosterdenovo.com or call 07305 970959 or 0207 469 2800 to find out more about how I can help you.

Please note

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.