What The Changes Mean For Your Finances – Forbes Advisor UK

Delivering his Budget statement today, Jeremy Hunt MP, Chancellor of the Exchequer, promised permanent cuts in taxation designed to promote higher growth and “provide much needed help in challenging times.”

He announced a further reduction in the main rate of National Insurance, from 10% to 8%, effective from 6 April 2024, plus adjustments to child benefit payments to increase the number of households that qualify.

There is to be a consultation on a targeted ‘UK’ or ‘British’ individual savings account and Nationals Savings & Investments will launch a British Savings Bond in April, with a to-be-decided rate fixed for three years.

Pensions reforms will also encourage greater investment in UK companies.

Mr Hunt also said that inflation in the UK, currently running at 4% per annum, will fall below the Bank of England’s target of 2% in the coming months. This is likely to encourage mortgage lenders to hold or reduce their rates for borrowers.

The Chancellor also announced a consultation on new rules for Individual Savings Accounts to encourage greater investment in UK companies. National Savings & Investments will also launch a British Savings Bond with a three-year fixed return.

Budget Highlights

• The rate at which National Insurance Contributions are paid on earnings will fall from 10% to 8% from 6 April 2024. This follows a reduction from 12% to 10% which was announced in November and took effect on 6 January 2024. The rate of self-employed NICs will fall from 9% to 6% on 6 April, and Mr Hunt said he will continue to cut National Insurance rates when it is prudent to do so.

• Mr Hunt confirmed the introduction of a new stocks and shares British ISA (individual savings account), which will allocate a £5,000 tax-free allowance for investment in UK equities (outside an ISA, the purchase of stocks or marketable securities is subject to stamp duty at the rate of 0.5%). This will be in addition to the current £20,000 annual tax-free allowance available with other ISAs. At its launch, which will follow a consultation period, the British ISA will join the current menu of tax-free savings products, which include Junior ISAs, Lifetime ISAs and Innovative Finance ISAs.

• A new British Savings Bond was also unveiled by Mr Hunt, which will be available through National Savings and Investments (NS&I) from April this year. The account will offer a fixed rate of interest on savings for three years.

• The earnings threshold at which people start to lose their child benefit entitlement will increase from £50,000 to £60,000 from April this year. The change will take 170,000 families out of paying the tax, according to estimates. In addition, the upper taper, which is the rate at which the benefit is withdrawn completely, is being extended from £60,000 to £80,000. The government estimates that nearly half a million families will gain an average of £1,260 in 2024-25 as a result.

• The Chancellor will also consult making the eligibility rules for child benefit apply to collective household income by April 2026, rather than on an individual income basis. At present, the £50,000 threshold is triggered once any person in a household earns £50,000 a year, but would not apply if two people in the household were each earning £49,000, for example.

• The government will continue to consider a ‘pot for life’ model for defined contribution pension schemes. This proposal would enable employees to carry their pension pot forward from employer to employer, rather than having a new one set up with each move. 

• In a bid to encourage investment in UK equities, the Chancellor also announced new reporting rules, which will require pension providers to publicly disclose where their funds are invested, and how they have performed. According to HMRC, UK pension providers currently dedicate just 6% of funds to UK equities. 

• The Spring Budget also confirmed that State pension payments will continue to increase in line with the Triple Lock, rising by 8.5% to £221.20 from April. The issue of State Pension age – which research from the International Longevity Centre suggests could rise to 71 by 2050 – was not addressed.

• As part of today’s announcement, the government confirmed it would begin the sale of its 32% stake in NatWest Group to retail investors “this summer at the earliest, subject to supportive market conditions”. Shares are expected to be priced at a discount to make them more appealing to prospective investors.

• The higher rate of capital gains tax applied on the sale of second homes (affecting higher and additional rate taxpayers), is being cut from 28% to 24% from April 2024. CGT is applied on the sale of all homes that are not the taxpayer’s primary residence (for example second homes, investment properties and holiday lets). Basic rate taxpayers pay CGT at 18%, which is not set to change. Taper relief typically applies on CGT depending on how long you have owned the second property.

• From 1 June 2024, Multiple Dwellings Relief will be abolished. Properties currently eligible for this relief include houses, apartments, or flats bought in bulk, a self-contained annex purchased with a main house, and mixed-use property (such as a shop with a flat above).

• The Chancellor is scrapping the furnished holiday lettings (FHL) scheme from April 2025. Around 127,000 properties are registered under the scheme, which allows owners of holiday lets (but not other private landlords) to claim income tax relief against the costs of furnishing a property which they let out, for a profit, for at least 210 days per year, among other conditions. The aim of the move is to encourage more second home-owners to offer long-term lets to local people in their area. Tax experts at Quilter reveal a typical holiday let owner could lose around £2,800 a year in relief following the scrapping of the scheme.

• Mr Hunt announced a continued freeze on motor fuel duty – the freeze took effect in 2011 – to last a further 12 months. The 5p cut in the rate of duty introduced in 2022 – it now stands at 52.95 pence per litre for petrol and diesel – will also be maintained.

• Air Passenger Duty (APD) will see a one-off increase for all non-economy flights. While the 2025/26 APD rates for economy passengers will increase in line with forecast inflation, rates for those flying premium economy, business and first class (or private jet) will go up by the forecast RPI but will then be “further adjusted for recent high inflation”. Passengers in non-economy seats currently pay APD of between £13 and £200, depending on the flight’s distance.

• The Chancellor scrapped the planned 3% increase in alcohol duty scheduled for April 6, extending the freeze announced in his 2022 Autumn Statement to April 2025. Previously, in August 2023, the government applied the largest alcohol duty increase in almost 50 years, raising taxes on more than 85% of wines by 20%. Additionally, taxes on full-strength spirits went up by more than 10%.

• From October 2026, a new tax on vaping products will take effect. Vapes will be taxed at a rate of £1.00 per 10ml for nicotine-free liquids, £2.00 per 10ml on liquids that contain 0.1-10.9 mg nicotine per ml, and £3.00 per 10ml on liquids that contain 11mg or more per ml. The treasury plans to consult on the design of the new tax, which it says will raise £445 million in 2028/29. At the same time, there will be an increase to tobacco duty as an incentive for people to choose vaping over cigarette smoking. This will cost £2.00 per 100 cigarettes or 50 grams of tobacco.

• The government is consulting on how to implement the Organisation for Economic Cooperation and Development’s Crypto-Asset Reporting Framework from 2026. The international agreement provides for the reporting of tax information on transactions in crypto assets in a standardised way. The Treasury believes it will generate £75 million in tax revenues by 2028/29.

• The Household Support Fund, which is available to help vulnerable families in England pay for essentials such as energy bills and food, is being extended by six months. The fund, set up to help ease the cost of living crisis, was initially due to end this April. However, the Chancellor announced that it will be extended until September 2024. Councils decide how to run their support schemes and you can check whether you’re eligible for the schemes available on GOV.UK.