Keeping up with the changes from the Spring Budget 2024 can help you make smart decisions about your money. Introduced by the former Chancellor Jeremy Hunt, these updates were set by the previous government, and with Labour now in charge, we might see some tweaks. Here’s a breakdown of the key points. For more in-depth information check out the Government’s Spring Budget 2024 page, with updates when the next update comes out for next year’s.
1. National Insurance Contribution Rates Cut
There’s some good news for both employees and the self-employed. From 6 April 2024, the main rate of Class 1 employee National Insurance Contributions (NICs) will drop from 10% to 8%. This follows an earlier cut that took effect on 6 January 2024. These changes are designed to leave a bit more cash in your wallet, which is always welcome. This makes a great point to look for while checking out your monthly payslip.
Self-employed folks aren’t left out either. The main rate of Class 4 NICs will be reduced from 9% to 6% starting 6 April 2024, instead of the previously announced cut to 8%. Plus, there are plans to abolish Class 2 National Insurance later this year. From April 2024, self-employed individuals won’t have to pay Class 2 NICs unless they choose to keep their benefits entitlement intact.
Related: What Does My Tax And National Insurance Pay For?
2. High Income Child Benefit Charge Changes
Families with higher incomes will see changes to the High Income Child Benefit Charge. Starting 6 April 2024, the threshold for this charge will rise from £50,000 to £60,000, with a tapered charge for incomes between £60,000 and £80,000. This adjustment should ease the financial pinch for higher-earning families.
In addition, the government plans to move to a household-based system by April 2026, instead of the current individual income-based system. This shift is intended to make the system fairer by considering the combined income of households, potentially benefiting families with dual incomes.
3. Tax for Non-Domiciled Individuals to Change in 2025
Big changes are coming for non-UK domiciled individuals starting 6 April 2025. The current tax system will be replaced by a residence-based regime, and refers to UK residents whose permanent home for tax purposes is outside of the UK. Meaning anyone who has been a UK tax resident for more than four years will pay UK tax on their foreign income and gains, regardless of their domicile status.
Transitional arrangements will offer some breathing room, including the option to rebase capital asset values to 5 April 2019 and a temporary 50% exemption for foreign income taxation in the first year (2025-26). There will also be a two-year Temporary Repatriation Facility allowing individuals to bring previously accrued foreign income and gains into the UK at a 12% tax rate. Plus, eligible employees can claim Overseas Workday Relief for their first three years of tax residence, making the transition a bit smoother.
4. Capital Gains Tax Rates Reduced
If you own property, there’s good news on the Capital Gains Tax (CGT) front. From 6 April 2024, the higher rate of CGT on residential properties will drop from 28% to 24%. The lower rate of 18% for gains within the basic rate band will stay the same.
This reduction is expected to give the property market a bit of a boost, making it more attractive to buy and sell homes. By lowering the tax burden, the government hopes to encourage more property transactions and investments.
5. A New UK ISA and British Savings Bonds
For those looking to save, the government is launching a new UK ISA and British Savings Bonds. The UK ISA will offer a £5,000 allowance on top of the existing ISA limit, providing a new tax-free way to invest in UK-focused assets.
British Savings Bonds, available through National Savings and Investments starting April 2024, will offer a guaranteed interest rate fixed for three years. This initiative aims to encourage savings and provide a secure investment option, helping to boost financial security for many.
6. Childcare Funding Increasing
Supporting working families, the government has committed an additional £2.5 billion for the NHS in England for 2024-25. This funding aims to keep day-to-day services running smoothly and help reduce waiting times.
Additionally, the hourly rate paid to childcare providers for delivering free hours for children aged nine months to four years will increase, reflecting workforce costs. This represents an extra £500 million investment over two years, giving providers the confidence to expand services and support the government’s free childcare expansion. An extra £500 million will also be allocated to councils for adult and children’s social care, enhancing local support services.
7. Transfer of Assets Abroad Changing
From 6 April 2024, new legislation will close loopholes allowing individuals to use companies to bypass anti-avoidance rules under the Transfer of Assets Abroad (ToAA) provisions. This aims to ensure everyone pays their fair share of UK income tax.
By tightening these regulations, the government is committed to combating tax avoidance and ensuring a fairer tax system for all.
Summary Of Spring Budget Announcements
The Spring Budget of 2024 introduced various changes that could impact your finances. From cuts in National Insurance rates to new savings opportunities and adjustments in tax regimes, these measures offer a mix of benefits and new considerations. Since these changes were made by a previous government, keep an eye out for potential revisions from the current Labour administration to stay ahead in your financial planning. For all things money saving, life hacks, or related updates, check out our Good Vibes blog.
