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All you need to know from the chancellor’s Spring Budget

06 March 2024

Jeremy Hunt introduced a swathe of policies, including the launch of a new UK ISA, cuts to national insurance and more.

Chancellor Jeremy Hunt’s latest Budget had a number of eye-catching proposals and policies that will affect investors, savers, households, workers and businesses.

Below, Trustnet rounds up the main points from the Spring Budget.

 

UK ISA

Hunt announced the introduction of a new UK individual savings account (ISA) aiming to encourage retail investments into UK equities.

The new UK ISA, which builds on the Edinburgh and Mansion House reforms, will grant a £5,000 allowance on top of the already existing ISA allowance of £20,000.

Other ISA allowances remained frozen, however, at £20,000 for cash and stocks & shares ISAs and £9,000 for junior ISAs.

 

Savings and pensions

The government is also launching  British Savings Bonds, which will offer investors a guaranteed interest rate, fixed for three years. This will be available from April 2024 and delivered through National Savings and Investments (NS&I).

Hunt also announced that the Financial Conduct Authority’s spring new value for money framework will include proposals requiring contract-based Defined Contribution (DC) default funds to disclose their historic net investment returns as well a breakdown of their asset allocations, including UK equities. 

 

National Insurance (NI)

The main rate of employee national insurance contributions (NICs) will be lowered by 2p from 6 April 2024 onwards, from 10% to 8% for salaried workers and from 8% to 6% for self-employed people.

Announcing cuts to national insurance contributions, Hunt claimed that taxes on wages are unfair; income from wages is taxed twice – by income taxes plus national insurance – whereas other sources of income are only taxed once.

The cuts announced today follow similar moves in last year’s Autumn Statement, when NICs were lowered by 2p for employees and 1p for the self-employed.

Hunt said the Conservative party has cut NICs by a third in six months, so British workers now have the lowest effective tax rate since 1975 and the lowest of any G7 country.

Income tax, meanwhile, remained unchanged.


Capital gains tax (CGT)

The higher rate of CGT residential property will drop from 28% to 24%, while the lower rate will remain at 18%. However, the planned halving of the capital gains tax allowance from £6,000 to £3,000 remains in place.

 

Other taxes

Tax rules for non-UK domiciled individuals, or ‘non-doms’ are being replaced by a residence-based regime. All UK residents who stay in the country for more than four years will pay the same tax on their foreign income, regardless of their domicile status.

Elsewhere, a new duty on vaping was introduced to discourage non-smokers from starting to vape, while there was also an additional levy announced on tobacco, to keep a financial incentive for those wishing to quit smoking.

Alcohol duty was frozen until February 2025 while the fuel duty was maintained for a further 12 months.

 

Child benefit

The threshold of the high income child benefit charge will be increased from April 2024 from £50,000 to £60,000. Additionally, the rate will be halved, meaning the benefit will not be fully withdrawn until an individual earns £80,000 (currently £60,000).

However, a wholesale change to the system is underway, with the charge to be based on household income rather than individual income from April 2026, with consultations expected in due course.


Economic growth forecasts

Inflation is expected to fall to 2% by the second quarter of this year and a 2024 average of 2.2%, according to data from the Office for Budget Responsibility (OBR).

The forecast comes after inflation fell more sharply than expected in November (from a 41-year high of 11.1% in October 2022 to 4.2% in the final quarter of 2023, 0.6 percentage points lower than anticipated).

If this is achieved, the Bank of England’s target will have been met one year sooner than originally expected. But there is still “considerable uncertainty around this forecast”, the Office admitted, from both domestic and external inflationary pressures, especially around energy prices.

Meanwhile, the OBR predicts GDP to grow 0.8% in 2024 and then pick up to around 2% in 2025. The policies announced in this Spring Budget should provide “a small temporary boost to demand in the near term and to supply in the medium term”, raising real GDP by 0.2% in 2028-29, when the assumed rate will reach 1.7%.

 

Energy profits levy

The windfall tax imposed on oil and gas companies profiting from rising prices was extended for a further year until 2029, although the chancellor said it remains temporary and will be removed when prices return to more normal levels.

 

Natwest stock sale for retail investors

Hunt reiterated the government’s commitment to fully exiting its NatWest shareholding, acquired as a part of a bailout during the 2008 global financial crisis (when it was called The Royal Bank of Scotland Group), by 2025-26.

In line with this and the Budget’s emphasis on developing the UK’s savings and investment culture, part of the NatWest share sale will be targeted at retail investors, possibly by summer “subject to supportive market conditions and achieving value for money for the taxpayer”.

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