Our Spring Budget 2024 key points

Our Spring Budget 2024 predictions were all about how the government would navigate the competing challenges of inflation, cost-of-living pressures, and a sluggish economy.

So, let's see how those predictions stacked up against the actual announcements:

Income Tax

No changes to personal tax rates or allowances, as Income tax cuts were off the table this year.

This means Main personal allowance and 40% thresholds will remain at same levels and will do so until 2027/28.

National Insurance

Further cuts to NICs beyond those announced in the Autumn Statement were expected – and they were confirmed.

Employees class 1 NIC reduced from 10% to 8% with effect from 6th April 2024, and there was a cut in NIC class 4 for self employed to 6% with effect from 6th April 2024.

The self-employed have had to pay flat rate Class 2 NIC for many years, which have conferred entitlement to State pension, as well as profit-related Class 4 NIC.

As announced in the Autumn Statement, from 6 April 2024, Class 2 NIC will not be required to secure benefits for anyone earning above £6,725, saving £179.40 a year for those earning over £12,570.

Anyone earning less than that can still pay Class 2 voluntarily in order to maintain a full contribution record; the Spring Budget included an announcement that the Government will consult later this year on how to achieve abolition of Class 2 for those affected.

VAT Changes

An increase in the VAT registration threshold to benefit small businesses was rumoured to be a possibility.

The good news for small businesses arrived! The VAT registration threshold was indeed raised to £90,000 and £88,000 – the first threshold increase since 2017, and both will come into effect on 1st April 2024.

It was announced during the Budget that these thresholds would be frozen, but there was no indication as to how long that might be for.

Investment into UK Enterprise

It was rumoured in the Autumn Statement that ISA investors could be encouraged to invest in UK listed shares.

In the Spring Budget, the Chancellor announced a consultation on a new ‘British ISA’, which would give an additional annual allowance of £5,000 to be invested in British companies.

However, no date has yet been set for the introduction of this product.

Inheritance Tax (IHT)

The rates for IHT nil rate band remains unchanged at £325,000 until the end of 2027/28, meaning the threshold has been the same since April 2009.

Even though more people may be subject to the tax, the £175,000 ‘residential nil rate band enhancement’ on death transfers may reduce impact where it applies.

Married couples may now be able to leave up to £1 million free of IHT to their direct descendants (£325,000 plus £175,000 from each parent), but the rules are complicated. Read our IHT Guide to see how current guidelines may affect you, or get in touch with our team for a more in-depth exploration of your situation.

Child Benefit Reform

The government seemed to heed the words of Martin Lewis and delivered a change in Child Benefit thresholds, which will be a welcome change for many.

The threshold for the High-Income Child Benefit Charge was confirmed to be increased from £50,000 to £60,000 for 2024/25.

A joint income review expected in the predictions wasn’t announced, however this is now expected to be reviewed in 2026.

Cigarette and Alcohol Duty

As expected, the 5p cut in fuel duty was indeed held steady.

National living wage

It was announced that from 1st April 2024, the National Living Wage will apply to those aged 21 and over rather than 23, and will rise to £11.44 per hour.

Capital Gains Tax (CGT)

The maximum rate of CGT on residential property was cut to 24%, exceeding predictions of it remaining unchanged.

For this budget, the Chancellor seemed to prioritise tax breaks through reduced NICs and a higher VAT registration threshold, but held off on income tax cuts.

This could suggest a plan to focus on stimulating business activity and immediate cost relief for workers, rather than long-term changes to income tax brackets. However, the announcement of a reduction in the CGT rate for higher-rate taxpayers on residential property was a surprising twist.

This budget walked a tightrope between providing tax relief and managing a challenging economic climate. With the next election looming, it will be interesting to see how these measures play out in the coming months. If you have any queries relating to your finances, you can get in touch with us.