The Chancellor of the Exchequer, Jeremy Hunt MP, announced in the Spring Budget 2024 the following changes:
- A new UK ISA is being consulted on, with its own allowance of £5,000 a year
- An increase to the High Income Child Benefit Charge starting threshold to £60,000 from the tax year 2024 to 2025 and onwards
- Reduction to the higher rate Capital Gains Tax (CGT) rates that apply to residential property gains from 28% to 24%
- Non-domicile tax system will be abolished and replaced with a fairer system in April 2024.
- Reduction to Primary Class 1 National Insurance contributions from 10% to 8% from April 2024. Class 4 will see a decrease from 8% down to 6%.
New UK ISA
We expect to see further announcements being made regarding the extra ISA allowance of £5,000.
The additional announcement will need to establish what the rules are surrounding the ISA and what qualifies to be used. However, what has been confirmed is the amount, the intention behind introducing it, and how the new allowance will be separate from other ISA allowances.
It has not yet been said how the extra allowance will be given. For example, whether new separate ISAs will be needed, whether people can access this through a current account and what exactly it can be invested in.
However, any form of savings vehicle that shelters investments from tax is worth considering, especially as we have seen large reductions in the CGT and Dividend allowances over the previous few years. ISAs can be a good method to save for retirement, providing tax free withdrawals later in life, especially if pensions have been fully funded.
Higher Income Child Benefit Tax Charge
Another big announcement was moving the assessment of the Higher Income Child Benefit Tax Charge from a single-paid assessment to a household-paid assessment by April 2026. This would make big changes to the way UK tax is applied with the majority set up on an individual basis. It is assumed that with HMRC being given the power to collect and measure information on a household basis, then further forms could be considered to be based on household, instead of individual basis.
The level of income used to assess whether the tax charge applies will increase to £60,000 from £50,000 and the upper threshold at which it is clawed back will rise from £60,000 to £80,000.
If you still find yourself subject to the charge, pension contributions could be used as an effective planning tool to reduce this. Paying into your pension via salary sacrifice, reduces what is classed as your total income, and it could allow you to keep your child benefit, but also boost your pension savings at the same time.
Non-domicile rules
From the 2025 tax year those who move to the UK will not be required to pay tax on money they earn abroad for the first four years. Once that period has ended if they then continue to live in the UK, they will then have to pay the same tax as everyone else.
Reduction in National Insurance
It was expected that a further reduction in national insurance would be introduced. Both dropped rates will apply from April 2024. There was a reduction also in January, so it was expected in this budget to see a further reduction.
Tax allowances
No additional tax changes were made, the CGT exemption will be reduced from £6,000 to £3,000 and the Dividend allowance will be halved from £1,000 to £500. Any other tax allowances will stay the same as they are this year.
How can we help?
Zoe Till is a Partner and Chartered Financial Planner in our expert Independent financial advisers team. Zoe’s areas of expertise include investment advice, retirement planning, Inheritance Tax and lifetime cash flow modelling.
If you would like any advice concerning the subjects discussed in this article, please get in touch with Zoe or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online form.