Against the backdrop of pressure to cut taxes while growing the UK economy, Chancellor Jeremy Hunt delivered the 2024 Spring Statement on Wednesday 6 March and outlined the government’s taxes and spending plans ahead of the next general election. In the Statement, he revealed changes to Child Benefit and National Insurance.
No date has yet been set for the general election, but it’s expected to take place in the second half of 2024. This is likely to be the last Statement before the election. Below we summarise how the 2024 Spring Statement may impact your finances.
Spring Statement 2024 points at a glance:
- National Insurance cut from 10% to 8%;
- Child Benefit earnings threshold raised;
- further £5,000 ISA allowance for ‘UK ISA’;
- top capital gains tax rate on property reduced to 24%;
- furnished holiday lettings tax breaks scrapped;
- VAT threshold rising from £85,000 to £90,000; and
- non-UK domiciled individuals (“non-doms”) status abolished.
National Insurance reduction
Chancellor Jeremy Hunt’s flagship announcement, in the Statement that promised tax cuts for all, was a reduction in employee National Insurance. The cut from 10% to 8% will take effect from 6 April 2024, the start of the next tax year. For workers on the average UK salary of £35,400, it equates to savings of around £450 a year.
National Insurance was reduced from 12% to 10% in the 2023 Autumn Statement and the government says the average worker will be £900 a year better off from the two successive reductions.
Meanwhile the main rate of National Insurance for self-employed workers will fall from 9% to 6% from 6 April 2024. The Treasury says this will save £650 a year for an average self-employed person earning £28,000. Nevertheless, the threshold at which you start paying income tax remains frozen at £12,571.
Director (VP) Public Affairs at PensionBee; Becky O’Connor says: “Putting more money in workers’ back pockets on the back of a prolonged cost of living crisis is clearly a vote-winning move but will also make a genuine, pretty much instant difference to individual household budgets, creating space to save or spend.”
National Insurance is paid by people between 16 and State Pension age (66, rising to 67 from 2028) on earnings of above around £12,500 a year. National Insurance isn’t paid by pensioners, so they’ll not benefit from the rate reduction. However, the State Pension is rising by 8.5% to £11,502 a year from 6 April 2024 under the triple lock agreement.
Child Benefit threshold raised
Households with children may find themselves better off from 6 April 2024, as Jeremy Hunt announced the Child Benefit threshold is rising from £50,000 to £60,000. It means if there’s a parent - or two individuals - earning up to £60,000 in a household, you can now keep the full Child Benefit. Child Benefit will be lost once one parent earns above £80,000 – up from the current £60,000. Child Benefit is worth about £111 a month for the first child from 6 April 2024, and £73 a month for a second child. So in households where a parent earns £60,000 a year, they may find themselves £2,200 better off from April 2024.
One way to keep your earnings below the Child Benefit threshold is to pay more into your pension. You can do this through a workplace pension scheme or a private pension. This means if you earn £70,000, for example, you could pay £10,000 into a pension and still receive the full Child Benefit (providing there isn’t another earner in your household with earnings above the threshold).
There are also plans to address the frustration of Child Benefit being assessed on individual income rather than family income – which can penalise single-parent families and those where only one parent is working. The government has launched a consultation that should ensure Child Benefit is based on overall household income, rather than the earnings of a single individual, by April 2026.
ISA limit increase
The total annual Individual Savings Accounts (ISA) limit is set to increase from £20,000 to £25,000 – but there’s a catch. The £5,000 additional ISA allowance is only for savers who invest in UK-listed companies.The new “UK ISA” aims to encourage investment into UK companies through the new £5,000 allowance. Any investment growth will be tax-free. The government plans to consult on the details, so there’s no launch date yet.
Property tax changes
There were a couple of announcements in the Spring Statement that may impact property investors. The first is that the top capital gains tax rate on second homes or investment property is falling from 28% to 24%. But for holiday let investors, taxes are increasing. The furnished holiday lettings (FHL) tax regime is being abolished from April 2025, meaning owners of holiday homes can no longer deduct full mortgage interest. The aim is to incentivise more landlords to let property for the long-term amid a current shortage of rental properties, rather than the tax system favouring short-term lets.
VAT threshold raised
Small business owners and sole traders may be pleased to hear the threshold at which you have to pay VAT is rising from £85,000 to £90,000.
Non-dom status abolished
The current tax rules for non-UK domiciled individuals (“non-doms”) will be abolished and replaced with a residence-based regime. It means those who stay in the UK for more than four years will pay the same tax on their foreign income and gains as all other UK residents.
In summary
Lots of announcements from the Chancellor in the 2024 Spring Statement are already in motion. Workers should see more disposable income from 6 April 2024 with the National Insurance cut, a welcome addition against the backdrop of the cost of living crisis. Although if you’ve already reached State Pension age, this won’t impact you. Households with children may also see an increase in their household budget as the Child Benefit earnings threshold increases from £50,000 to £60,000. The government estimates 485,000 families will gain an average of £1,260 in Child Benefit over the coming year.
Elizabeth Anderson is a Personal Finance Journalist and Editor (Times Money, Metro and i paper).
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
