Notable Events
6 min read

Spring Budget 2024: the debrief

IQ’s quick guide to the 2024 Budget delivered by Jeremy Hunt. Hunt announced a reduction in national insurance contributions which will be offset by the abolition of the “non-dom” tax regime and other tax increases on vapes, tobacco and business-class flights.

Jeremy Hunt unveiled his last scheduled Budget before the general election earlier this afternoon. As widely expected, his major announcements focused on reducing the tax burden for workers and parents.

Our Wealth Managers Tom Fleming and Nick Rolf have analysed the key points in the Chancellor's statement to help you understand how these changes could potentially affect you, your family, and your business.

The essence of today’s budget is clear: the economy is turning a corner and “more investment, more jobs, better public services and lower taxes” are all on the way. The Chancellor also outlined his steps for rewarding work and “making work pay” in recognition of the need to expand the workforce and ultimately deliver growth. The tax cuts will be paid for through a mix of tax increases elsewhere – including on business class airfares, short-term holiday lets, vapes and tobacco.

Acknowledging the current high interest rates, Jeremy Hunt went on to emphasise that the economy is doing better than expected. The Chancellor forecasts that inflation, currently at 4%, will fall below the 2% target rate sooner than expected – in a few months. This is a significant improvement since the start of Rishi Sunak’s term as PM when inflation was at 11%. We have summarised the key considerations points below.

Key points at a glance

  • National Insurance is to be cut by 2p, saving the average worker an estimated £450 a year
  • New “British ISAs” are to provide an extra £5,000 tax-free allowance for savings invested in UK firms
  • Duty on fuel and alcohol has been frozen
  • Child benefit threshold has been raised to £60,000
  • Productivity plan for NHS will unlock £35bn in savings
  • The Household Support Fund has been extended for six months
  • Tax perks for owners of holiday lets have been scrapped
  • The ‘non-dom’ tax regime is to be scrapped
  • VAT threshold for small businesses has been increased from £85,000 to £90,000
  • New taxes have been introduced on vapes, and there are higher taxes on business class flights
  • Higher rate of tax paid on profits from selling property has been cut from 28% to 24%

National Insurance tax cuts

The cornerstone of the Chancellor's announcements was a 2p cut to the rate of National Insurance paid by employees. This will result in an estimated annual saving of £450 for the average worker, meaning a total of £900 in conjunction with the similar reduction announced in the Autumn statement.

Reference: Investors Chronicle

The Great British ISA

The Chancellor has announced the creation of a new “British ISA”, which will offer an additional £5,000 per year of tax-free investment in UK equities.

This initiative is part of the government's plan to encourage more individuals and pension funds to invest in promising UK companies.

In addition, local authorities and Defined Contribution (DC) pension funds will be required to disclose the amount they have invested in UK stocks. Currently, UK pension funds only invest a small portion (4%) of their assets in UK stocks.

This appears to be good news as it increases the amount of money that you can contribute towards a tax-advantaged account each year. We will, however, need to analyse the finer detail before providing further comments.

Child Benefit

The Chancellor has raised the income level at which parents have to start paying back child benefit via a High Income Child Benefit Charge from £50,000 to £60,000, with the   top of the taper increasing to £80,000.

Jeremy Hunt said that the Treasury would look to introduce a household-based system from April 2026, stating that this will result in nearly half a million families saving an average of £1,300 the following year.

Property changes

The Chancellor made significant amendments to property taxation, primarily aimed at revenue enhancement.

He also announced the discontinuation of tax relief under the furnished holiday lets scheme. This scheme currently offers benefits to approximately 127,000 holiday rental businesses, providing tax advantages like allowances for expenditure on furniture and appliances, and mortgage payment tax relief.

This scheme has faced criticism as it essentially benefits secondary homeowners who occasionally rent out their property and encourages landlords to shift their properties to holiday lets rather than long-term rentals, which no longer benefit from a mortgage interest tax reduction.

Hunt also declared a reduction in the higher rate of capital gains tax on residential property from 28% to 24%, with the expectation that this step would generate revenue by stimulating more property transactions.

Non-dom tax regime

The Chancellor has targeted one of Labour’s notable tax commitments by eliminating the non-dom tax regime. This move will generate an extra £2.7 billion in tax revenue, which will partially finance the 2% reduction in national insurance.

A “non-domiciled individual” refers to someone who resides in the UK but does not consider it their permanent home. By employing the “remittance basis”, these individuals only pay UK income and capital gains tax on income earned and gains accrued within the country.

This provision has allowed wealthy individuals in the UK to choose a country with lower taxes as their domicile, resulting in significant tax savings.

From now on, individuals relocating to the UK will enjoy a four-year tax break and will be free to transfer their overseas funds to the UK. The updated regime, effective from next year, will be more straightforward but will limit the timeframe compared to the current 15-year period during which non-doms are not taxed on their foreign income.

Get in touch with us

If you have any questions about this budget or how it may impact your personal finances, please don't hesitate to get in touch with your wealth manager. We are always here to provide guidance and to help you navigate any changes. Our goal is to ensure that you feel well-informed and confident in your financial decisions.

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