It’s fair to say that there was a lot of anticipation leading up to the Spring Budget 2024. With rumours about an IHT cut and a change in strategy for personal income tax, it seemed every family in the UK had their ear to the ground in the hope that 2024 might be a little brighter.
As an experienced financial advisor in Bristol, we were no different. While we’ve operated through plenty of budgets, predicting exactly what might change and what might affect a specific estate is never easy – and is always just that: a prediction.
But now that the budget has been announced, we’re getting to work organising and reconfiguring the financial plans of our clients, helping them to make the most of their assets and navigate the changes that are going to occur over the next few years.
Without a doubt, there are a lot of them. Across the Spring Budget 2024, there are plenty of factors that will affect every household in the UK, to the point where it’s impossible to go through each one in a single article.
But to help you get an idea of what the budget means for your household, we’re going to list the 5 key takeaways, explaining why the changes have been made and how they might affect you as an individual.
National Insurance as the ‘Headline Change’
The key change that will have the widest impact is undoubtedly the reduction in NIC – national insurance contributions – which has fallen by 2%. Between April 2024 and March 2029, the reduction in NIC is set to save taxpayers around £47 billion, cutting down the main rate of primary Class 1 from 10% to 8%.
For the self-employed, this will be a cut to the main rate of Class 4, resulting in a reduction from 8% to 6%, which is in addition to the previous reduction from 9% to 8%. For households across the country, this should help to mitigate the impact of inflationary costs and the subsequent freezing of tax rate bands.
A Reduction in Capital Gains Tax
Another key change is the reduction of CGT – capital gains tax – which will see a reduction from 28% to 24% on residential properties. The lower rate of tax will remain at 18% for gains that fall within the basic rate band. For residential homeowners, it is thought that the increase in transactions will compensate for the lowering of the tax rate, as it will work to stimulate the market and incentivise earlier disposals of residential properties, including buy-to-let properties and second homes.
Abolition of ‘Non-Dom’ Tax Status
One of the most surprising takeaways was the abolition of ‘non-dom’ tax status, which has been on the cards for years, and yet has never been actualised before now. For those unaware, ‘non-dom’ refers to a UK resident who has a permanent home outside of the UK for tax purposes. It doesn’t have anything to do with their nationality or citizenship – although these can be influential factors.
Under the new plan, from April 2025 onwards, the non-dom regime will come to an end. But for those feeling financial stress because of this, there is a four-year exemption that can be taken advantage of, with existing non-doms given a transitional provision with a window to remit pre-April 2025 by April 2027, paying a lower rate of 12% tax.
Freeze on Alcohol and Fuel Duty
It’s also worth noting that the freeze on Alcohol Duty has been extended from August 2024 to February 2025, with Fuel Duty also being frozen for another 12 months. With the 5p fuel cut being introduced back in 2022 and the duty on alcohol rates coming into play in August 2023, this will contribute to a total save of £250, and a total tax cut of around £8 billion over the next year. Significantly, Chancellor Jeremy Hunt has suggested that this freeze alone will help to lower inflation by 0.2%.
No Change for Inheritance Tax
When examining a new budget, it’s just as important to look at what’s not in the budget as well as what is. One of the biggest absences has to be a change to inheritance tax. With IHT set to be a pivotal issue at the next general election, there was a lot of anticipation for a potential cut. Instead, inheritance tax has remained at the same frozen threshold of £325,000, which could result in a 7% rise in total taxpayers over the next 8 years.
Along with inflation, the total threshold should have been £458,931 in 2028, and this means that what was once a tax on the ‘wealthy’ has become a lot more all-encompassing. With avenues available for reduced IHT, it is not a huge negative for those who have appropriate financial advice, but for those having to navigate the complex maze of IHT themselves, it is a significant absence that might cause trouble down the line.
