The Chancellor started his speech by claiming that the policies announced in the 2024 Spring Budget will result in “more jobs, more investments and lower taxes”, but the most important question for us is: How will the Budget affect you, our client? 

We’ve put together a simple, clear guide to summarise everything that you’ll need to know about how your finances may be impacted now and in the future.

Investments

New “British ISA” introduced

Chancellor Jeremy Hunt announced the introduction of a British ISA, which will provide a boost to the amount that individuals can save and invest tax-free. The ISA will allow savers to benefit from an additional £5,000 tax-free allowance per year, to be invested solely in UK equity.

This allowance will be on top of the original £20,000 per year limit, allowing savers to invest up to £25,000 per year across all ISAs (as long as at least £5,000 of that figure is earmarked for UK investments). This has been introduced in a hope to boost the amount of investments in UK entities to encourage economic growth.

National Insurance

National insurance cut by 2p, from 10% to 8%

A sizable national insurance cut was at the very centre of the Spring Budget, as it was in November during the Autumn Statement when it was cut from 12% to 10%.

The Chancellor has once again announced that he will be cutting the main rate of national insurance contributions (Class 1) paid by workers by 2p, from 10% to 8% – in effect from 6th April 2024 at the start of the new tax year. He also announced similar changes to national insurance paid by the self-employed (Class 4), falling from 8% to 6%.

Mr Hunt emphasised that the new cuts should save the average employee up to £450 per year, and £350 per year for those who are self employed – cutting rates by a third in the last six months.

budget

Capital Gains Tax

The higher rate will be cut on property sales

Capital Gains Tax (CGT) is to be reduced, with the rate paid by higher or additional taxpayers on residential property being reduced from 28% to 24%. 

While this is positive news, it’s important to note that many individuals will actually see their CGT bills rise as a result of the tax-free allowance being reduced again, from the current limit of £6,000 to just £3,000 in 2024/25.

Pensions

Pension funds will have to disclose domestic asset figures

Pension funds will now have to disclose what proportion of their assets are held in UK equities, adding that further action would be taken if not enough funds are invested domestically. According to supporting information supplied by the Government, the average pension allocation to UK equities currently stands at 6%.

To improve data, the government intends to bring forward requirements for Defined Contribution pension funds to publicly disclose the breakdown of their asset allocations – working closely with the Financial Conduct Authority. Mr Hunt’s long-term aims will be to make it easier for pension funds to invest in the UK.

Piggy bank money

Comments from our Director, Russell Brett

Most of the content of this budget statement was pre-leaked, but as usual there were a few interesting areas of discussion.

The British ISA could be attractive for many of our clients – with the additional £5,000 annual allowance for ISAs available, there is a clear tax benefit – but we should always be mindful that geographical diversification and asset allocation may have a bigger impact on the investment return. This form of ISA product doesn’t actually exist yet, so we will bring you more information as it develops. 

The National Insurance liability decreases will come as welcome relief to those pre-retirement, and the Capital Gains Tax decrease for above basic rate taxpayers could offer some clients an encouraging saving of £400 per £10,000 of residential property gain.

However, the key allowances remain as is from last year’s Autumn Statement, effective as of 6th April – namely, Personal Savings Allowances (£1,000, £500 or £0 per year, depending on your tax bracket), Capital Gains Tax allowance to reduce to £3,000 per year, and Dividend nil rate taxation to decrease to £500 per year.

Overall, it generally felt like a “Buy British” investment theme coming through, as seen in the ISA and Pension comments above. Did someone mention an election this year?! 

The turbulence of recent years under Conservative governance has impacted all of our pockets – although to be fair, they have had some significant issues to manage such as the Covid pandemic and War in Europe, not helped by a constant accusation of general incompetence. However, you can’t help thinking, should a likely Labour government be in Number 10 this year, then how would they pay for these Tory promises with fairly limited money in the pot?

As always, an interesting year…

If you have any queries or concerns regarding the Spring Budget, please don’t hesitate to get in touch with our team, who will be happy to help.