What does the Budget mean for you?

Which tax changes and new policies were introduced in Jeremy Hunt's spring Budget and what does it mean for your personal finances?

| 8 min read

Yesterday, Jeremy Hunt presented his last Spring Budget before the expected November election, although he has not ruled out a mini budget before that event.

As usual, there was little to be surprised about in Jeremy Hunt’s Budget statement, with most of the measures trailed in the press before the Chancellor of the Exchequer stood up to make his speech in the House of Commons.

We summarise the main points below.

What does the spring Budget mean for you?

1. Cut to National Insurance

It is estimated that this will save the average worker about £450 a year. Someone earning £25,000 a year will save another £249 a year. Higher earners will take home an additional £754 a year. This is on top of the 2p cut announced in the autumn statement.

For the self-employed, Class 4 National Insurance contributions on all earnings between £12,570 and £50,270 were already due to be cut from a rate of 9% to 8% in April. The Chancellor said that would now go down to 6%.

However, pensioners and those working beyond the State Pension Age will not benefit from the cut as they no longer pay National Insurance.

2. New British ISA introduced

The chancellor announced this would be a budget for growth with a focus on investing in ground-breaking industries across the UK. As part of this he announced the launch of a new ISA that would allow individuals to invest a further £5,000 a year tax efficiently as long as these were investments in British companies.

This comes on top of the existing £20,000 ISA allowance.

The objective is to get more people investing in growth across the British economy. But it remains to be seen what he means by “British company”. The FTSE 100 is made up of multinational and even overseas companies that gain a large proportion of their earnings from foreign activities. The FTSE250 is more domestically focused but the devil will be in the detail.

3. More support for families

The threshold for the High-Income Child Benefit Charge will be increased to £60,000 from this tax year and the rate at which higher earners repay the benefit is to be halved. These child benefit changes will represent an average boost of £1,260 to around half a million working families. And from April 2026 the assessment will be based on household rather than individual incomes.

Chanceller Hunt also announced extra funding for free childcare places to make it easier for more families – particularly women – to return to work.

  • From April 2024, eligible working parents of two-year-olds will get support for 15 hours of childcare.
  • From September 2024, this will be extended to children between the ages of nine months and three years.
  • From September 2025, parents will be able to get 30 hours of childcare support for children between nine months and school age.

4. Household support fund extended

To help households cope with the effects of inflation and the cost-of-living crisis, the Household Support Fund has been extended for another six months with an additional £500 million funding.

5. Mixed news for property buyers

The chancellor acknowledged that the furnished holiday lettings regime – where second or third properties are rented out on a short-term basis – created a tax advantage over longer-term residential lets.

To address this, owners of holiday lets will no longer be able to claim any of the previous allowances including interest on their mortgage repayments. It is hoped that this will return more properties to the residential lettings market.

And the Multiple Dwellings Relief has been abolished in what some are calling a “granny annex tax”. In the past, people buying more than one residence have been able to pay a reduced level of Stamp Duty Land Tax. From June, the stamp duty tax relief ends and those buying between two and five dwellings in one transaction will have to pay the full duty on each property.

If a house has a separate dwelling – a so-called granny annexe – this is treated legally as two properties. So if you wanted an arrangement that meant relatives you care for could maintain some form of independence, you will have to pay two lots of stamp duty land tax.

However, the higher rate capital gains tax on the sale of a property that is not your main residence will reduce from 28% to 24% bringing it closer to the standard rate of 20%.

6. Help for small businesses

The threshold at which businesses have to register for VAT has been raised to £90,000. From 1 April, companies with earning below this amount will no longer have to register for VAT, saving them a bureaucratic headache. It is estimated that 28,000 small businesses are likely to benefit – encouraging them to invest and grow.

The VAT threshold has been a concern for many SMEs, as it brings more individuals and businesses into higher tax brackets.

7. Hints at further pension changes

In another bid to promote investment in British enterprises, Chancellor Hunt said he would take "further action" to push employers’ pension schemes to back British companies. He announced plans to force them to publicly disclose their levels of UK equity investment.

He also promised new powers to the Pensions Regulator and Financial Conduct Authority to ensure better value from defined contribution schemes by "judging performance on overall returns not cost", citing the Australian pensions' system.

Finally, he promised to make it easier for people to transfer their pensions when moving jobs through proposals for a “pot for life” that goes with you.

8. Other measures

  • To fund the cut in National Insurance the chancellor announced the scrapping of the Non-dom tax regime that allows people living in the UK but registered for tax elsewhere not to pay tax on their overseas assets. This will be replaced by a system based on domesticity. From 2025, new arrivals to the UK would not pay any tax on foreign income and gains for their first four years of UK residency, but after that, those who continued to live in the UK would pay the same tax as other UK residents.
  • A tax on vapes and vaping products will come into force in October to make them less attractive to new users – especially children – but the chancellor recognised that for many these also play a positive role for those wanting to give up smoking. Duty on cigarettes increased dramatically, too, to make sure vaping remains a more attractive option.
  • But alcohol duty has been frozen again to help the hospitality industry as it continues to struggle following the pandemic. And fuel duty has been frozen for another twelve months.
  • New tax reliefs and investments will help establish the UK as a world leader in high-growth industries such as the film and TV sector, advanced manufacturing, and life sciences.
  • A £360 million package will support innovative R&D and manufacturing projects across the life sciences, automotive and aerospace sectors – with a further £45 million funding to accelerate medical research into common diseases like cancer, dementia and epilepsy. All these proposals should encourage investment in the UK.

It wasn't all good news

There was no move to unfreeze income tax thresholds and with the cut in National Insurance more workers will be dragged into higher tax brackets in a process called “fiscal drag”. There was also no mention nor commitment to reducing inheritance tax, which is often touted as an election pleaser.

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        Are you ready for Tax Year End?

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        The tax treatment of pensions depends on individual circumstances and may be subject to change in future. It is always recommended that you seek advice from a suitably qualified investment professional if you have any doubt as to the suitability of a pension and/or the underlying investments. You should be aware that Stakeholder Pension Schemes are generally available and might meet your needs as well as a SIPP. Please remember the value of investments may fall as well as rise and your capital is at risk.