Chancellor Jeremy Hunt delivered the UK budget on 6th March 2024. The Chancellor and his Government took significant measures in the most recent budget, outlining crucial policies.
As the government introduces its fiscal policies and allocations, the eyes of companies, taxpayers, and communities are deeply intent on comprehending how these choices will impact their economic landscape.
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In this blog, we will check out the key points from the UK Budget statement.
Table Of Content
- Income tax
- National insurance
- Capital gains and dividend tax allowances
- Real estate
- Funding for enterprise and key projects
- VAT Registration Threshold
- Childcare and Child Benefit
- Non-Domicile Tax Reform
- Final thoughts
Income tax
With the rising cost of living continuing to bite, the potential of income tax cuts was subject to considerable debate in the run-up to Budget Day. Ultimately, the government reduced National Insurance rates by 2p, saving an average worker almost £450 a year.
This is in addition to the cut that was announced in the Autumn Statement and went into effect in January. The change intends to increase employment and reduce the “double taxation” of income (income tax and national insurance). The Chancellor also promised to reduce national insurance further in the future, provided certain conditions were met.
However, personal tax thresholds remained frozen, meaning more individuals will be pushed into higher tax brackets as wages rise.
National insurance
Jeremy Hunt has confirmed a reduction in the National Insurance Contribution rate from 10% to 8% starting in April 2024, alongside the previously announced 2% cut in November 2023. This move will save the average employed worker £900 per year. Furthermore, the rate for self-employed individuals will be lowered from 8% to 6%.
Capital gains and dividend tax allowances
In last year’s autumn budget, a few adjustments to tax-free allowances were scheduled to go into effect in April, but there were no new announcements on capital gains or dividend tax.
The tax-free allowance for capital gains will be reduced from £6,000 to £3,000 (having previously been cut from £ 12,300 in 2023). In the same way, the dividend tax exemption will drop from £1000 to just £500.
Anything above the annual allowance is subject to taxation, so it’s essential to plan to avoid unnecessary taxes.
Real estate
Residential property is a subject close to many people’s hearts, and several property-themed actions were announced.
The biggest surprise was the announcement of a reduction in residential property capital gains tax from 28% to 24%. This was based on evidence that indicates a lower tax rate would result in more property transactions.
Despite pre-budget rumours, there was no support for first-time buyers. To free up more properties for long-term rental, the Chancellor instead concentrated on the rental sector by eliminating tax relief on furnished vacation rentals.
As an additional means of raising money, the exemption from stamp duty on purchases of numerous houses was also eliminated.
Funding for enterprise and key projects
The Chancellor also revealed an initiative to boost investment in UK firms by launching a new ‘British ISA’, which will allow people to invest an additional £5,000 annually in UK equities beyond the current ISA limits.
This initiative seeks to encourage a new generation of retail investors and position the UK as an international innovation hub.
Hunt additionally suggests changes to pension fund regulations, needing disclosures of UK equity investments to encourage domestic investment.
The government will also look into ways to make transferring their pension savings easier when they change jobs.
This approach includes intriguing local authorities and stated contribution pension funds to reveal their stakes in UK stocks, emphasising that only 4% of pension fund assets are currently invested in UK shares.
Initially stated in the Advanced Manufacturing Plan in November 2023, the authorities pledged to make the UK the best global location for beginning, expanding, and developing manufacturing companies.
This dedication is being actualised, with the budget detailing the subsequent stages in enacting the £4.5 billion funding package for these industries. This funding involves over £2 billion for the automotive sector and £975 million for aerospace, accessible for five years from 2025.
VAT Registration Threshold
The VAT registration threshold will be raised from £85,000 to £90,000 from April 2024.
Given that the VAT threshold has not increased in many years, this change will not make an important difference to most companies. The underlying issue will always be how the threshold affects the expansion of companies near the VAT registration level.
Childcare and Child Benefit
Modifications will be made in April 2026 to base the High Income Child Benefit Charge on the household’s total income rather than solely evaluating the charge on the higher earner. Due to the complexity of incorporating this, as a temporary measure, the threshold will rise from £50,000 to £60,000 from 6th April 2024, and the amount obtained will not be repaid in full until one’s income exceeds £80,000.
For the next two years, the rates paid to nurseries to fund free childcare hours for parents of children aged nine months or older will persist for completeness.
Non-Domicile Tax Reform
A speculated change before the budget, the regime whereby individuals were permitted to avoid paying tax on their foreign income, will be eliminated and replaced by a new residency-based system from April 2025.
Under the suggested new system, foreign income would be tax-free for UK residents for the first four years. After that, regular UK residence taxation would apply. Individuals using the “non-dom” system will have a transition period.
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Final thoughts
The Spring Budget was filled with measures that concentrated more on the individual. While the Autumn Statement that preceded it provided more for companies. Together, they offer a framework for the upcoming election.
As we progress, policymakers, companies, and individuals must stay vigilant, agile, and collaborative in managing the possibilities and difficulties of the fiscal policies stated in the Spring Budget 2024.
Image Credit: Hannah McKay/Reuters
