As you will most likely have seen, yesterday saw the Chancellor of the Exchequer deliver what could be the final Budget before the next General Election. With that in mind, many had predicted a statement delivering a number of tax cuts and ‘sweeteners’ ahead of a defining year in UK politics.
Indeed, as predicted, Jeremy Hunt unveiled a second successive cut to National Insurance of 2p in the pound (from 10% to 8% for employees, and 8% to 6% for self-employed). It was also confirmed the full child benefits threshold for the highest-earning parent would increase from £50,000 to £60,000, while the usual freezes and increases on cigarette, alcohol and fuel duties were also revealed.
From a financial planning perspective, there was plenty to think about. Here are the key considerations you should be aware of:
Great British ISA unveiled
In a move broadly welcomed by key financial profession figures, the Chancellor confirmed the launch of a ‘British ISA’ following a consultation that will run until June. The ISA will provide investors with an additional annual allowance of £5,000 a year, which can be invested in UK equities. This will be in addition to the current annual ISA allowance of £20,000. The increase will benefit those utilising their full available allowance, while also providing a boost to UK capital markets.
Reform of non-dom tax regime
A policy promoted heavily in recent months by the official Opposition, Jeremy Hunt surprised many by announcing that the non-domiciled tax status in the UK would be scrapped from 2025. Replacing the system will be a residency-based scheme which will see UK residents who stay in the UK for over four years paying UK tax on foreign income and gains. While some have tentatively welcomed this move, many are waiting to see further details in terms of temporary exemptions.
Capital gains rate reduced
From 6 April, capital gains tax (CGT) on property will be reduced from 28% to 24%. The lower rate for any gains that fall within an individual’s basic rate band will remain at 18%, while Private Residence Relief will also remain in place. However, the furnished holiday lets (FHL) scheme, offering tax relief to those who let out properties as holiday homes, will be abolished in 2025. Meanwhile, in England and Northern Ireland, the stamp duty tax break when purchasing multiple properties will also end in June. This is not applicable to properties in Wales or Scotland, whose devolved administrations set stamp duties.
No scrapping or reduction of inheritance tax (IHT)
In what is always a hotly debated area, the Chancellor once again resisted the temptation to cut or change IHT in yesterday’s Budget. The nil-rate band will remain at £325,000 and the residence nil-rate band at £175,000. There were, however, minor adjustments made to the regime, with plans put in place to make it easier to pay IHT liabilities. From April 2024, personal representatives of estates will no longer need to have sought commercial loans to pay IHT before applying to obtain a ‘grant on credit’ from HMRC.
Business tax adjustments
While there are no overall changes to corporation tax rates, changes have been made to capital allowances. A form of tax relief to let businesses deduct the value of certain items from profits, from April, full expensing will apply to leased assets “when affordable to do so.” The VAT registration threshold will also increase from £85,000 to £90,000, with the government claiming this will take around 28,000 small businesses out of paying VAT.
Other economic notes
While our monthly market updates provide more insight on relevant market movements, the Office for Budgetary Responsibility (OBR) has revised growth estimates upwards from the Autumn Statement, to 0.8% in 2024 and 1.9% in 2025. Meanwhile, inflation is forecast to fall below the 2% target in June.
Of course, as ever, if you have any questions about how any of yesterday’s announcements may impact your financial plan, please don’t hesitate to contact your adviser.
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The contents of this article do not constitute financial advice in any way; if you have any concerns about your finances you should talk to your financial adviser. The value of your investments can go down as well as up.
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