Key points from the Spring Budget
It used to be that the unveiling of the annual Budget was shrouded in secrecy, with anticipation building around the contents of the infamous Red Box wielded by the Chancellor outside 11 Downing Street. Nowadays however, most proposals seem to be pre-empted by morning papers, leaving television pundits grasping for surprises that seldom materialise.
So despite hopes for unexpected revelations, the Chancellor's announcements this Spring aligned with expectations. Let’s take a look at the main points:
Having already announced reductions in his autumn statement, the Chancellor announced a further cut in NI contributions. From 6 April, the main rate falls to 8%, while self-employed NI contributions drop to 6%.
The government will launch a consultation later this year to deliver its commitment to fully abolish Class 2 National Insurance. This follows the announcement at Autumn Statement 2023 that from April 2024 no self-employed person will be required to pay Class 2, while those who pay voluntarily will continue to be able to do so to build entitlement to contributory benefits.
ISA subscription limits remain fixed at £20,000 for adult ISAs and £9,000 for Junior ISAs. The previously announced restriction on ‘one type of ISA each tax year’ will be removed from this April. In addition, it will be possible to do partial transfers of ISA funds from April (currently there are separate rules for the transfer of current and previous years subscriptions).
The biggest announcement from the Budget however was about a new 'UK ISA' to be introduced to support UK investment, which will focus solely on UK equities. This will give savers an additional annual subscription allowance of £5,000 on top of the existing £20,000 limit, with the same tax advantages.
The Chancellor also wants defined contribution pension schemes and local authorities to declare how much of their holdings are in UK equities.
Consultation on the design and implementation of the ISA will be open until 6 June 2024.
The Chancellor also announced changes that could affect home owners. The Multiple Dwellings Relief for Stamp Duty Land Tax is to be abolished from June 2024. He’s also abolished special tax rules for furnished holiday lets, which means that income from these will no longer be relevant UK earnings for pension purposes.
The government has cut Capital Gains Tax on some properties, reducing the higher rate from selling a residential property from 28% to 24% from April 2024 (the lower rate stays at 18%). This move is designed to generate more transactions in the property market.
The turnover threshold for VAT registration increases from £85,000 to £90,000 from April 2024. While this news may be welcome for businesses trading just below this current threshold, it is notable that this level has remained frozen for seven years.
The VAT deregistration threshold will also rise from £83,000 to £88,000
There were no new changes announced affecting pensions or Inheritance Tax. In addition, personal tax rates and income allowances remain the same: the basic rate threshold is at £12,570 and the higher rate threshold at £50,270.
The tax-free allowance on dividend income will fall from £1,000 to £500 from April 2024.
Any dividend income exceeding this allowance will be taxed at 8.75%, up to the Higher Rate Tax threshold, with any additional dividend income then being taxed at 33.75%.
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