The Chancellor announced some important changes in the 2024 Spring Budget that will affect UK workers, investors, and homeowners.
The Chancellor has decided to reduce the National Insurance (NI) rate by 2% instead of cutting income tax as some had thought. This approach is aimed at providing workers with direct support. Income tax bands and rates will remain the same.
National Insurance Cuts
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For Employees: The Class 1 National Insurance rate has been reduced by 2%, now at 8% for earnings between the primary threshold and the upper earnings limit. This could mean saving up to £754 annually.
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For the Self-Employed: Significant changes include the abolition of Class 2 NI for those with annual profits over £6,725 and a further 2% cut in Class 4 NI contributions, down from 9% to 6%, yielding savings of up to £1,131 annually.
Pensions Remain Untouched
There haven’t been any significant updates regarding pensions. The industry is still adjusting to the new system that has replaced the Lifetime Allowance (LTA). From April 2024, two new allowances will replace the LTA.
Investment and Savings
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The UK is introducing a new ISA to encourage more investments in UK equities. This will provide an extra subscription allowance of £5,000 each year.
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The subscription limits for ISA accounts are £20,000 for adults and £9,000 for Junior ISAs. Significant simplifications and flexibility improvements are expected to be introduced from April 2024.
Income Tax and Dividends
No changes will be made to income tax rates and allowances starting from the next tax year, except for Scotland, where a new tax band of 45% has been introduced for those earning between £75,000 and £125,140. Additionally, the dividend allowance for the 2024/25 tax year will be reduced from £1,000 to £500.
Child Benefit Reforms
Starting from April 2024, the amount of money you can earn before losing child benefit will increase from £50,000 to £60,000. The rate at which your benefit is reduced will be halved. By April 2026, the benefit will be based on your household, not just individual income.
Capital Gains Tax (CGT) Reductions
Homeowners and investors will benefit from a significant reduction in CGT on residential property. The rate will decrease from 28% to 24%, and the CGT annual exempt amount will decrease from £6,000 to £3,000.
Non-Dom Reforms and Inheritance Tax
Starting from 6 April 2025, the remittance basis of taxation for non-UK-domiciled individuals will no longer apply. A new regime will replace this called Foreign Income and Gains (FIG). There is also an ongoing consultation regarding the changes in inheritance tax for non-doms.
Corporation Tax
The rates for corporation tax will remain unchanged, with the main rate staying at 25% and the small profits rate at 19%.
