Spring Budget 2024 Summary

The headline-grabbing 2% cut in National Insurance in November’s Autumn Statement did little to disrupt Labour’s superior lead in the polls, but that hasn’t stopped the government from placing NI cuts at the centre of its Spring Budget too.

The Chancellor's so-called ‘Budget for Long Term Growth’ also includes reductions to capital gains tax on property, fuel duty and alcohol duty, partly funding through tax rises elsewhere, and news of a brand new ‘British ISA’.

Taxes

• If at first you don't succeed, try, try again. The Chancellor’s marquee policy in his Autumn Statement, reducing NI by 2%, didn’t generate the desired bump in the polls ahead of the looming General Election, so he’s running the playbook again. A further 2p cut will take effect from April, reducing NI to 8% for employees and 6% for self-employed workers.

• When combined with the NI cuts in the Autumn Statement, employees will get an average tax cut of £900 per year while the self-employed save an average of £650 per year. Pensioners, however, are once again excluded from the government's biggest tax cut, as NI is not paid on pension income.

• The government said the new cuts to NI will reduce the effective personal tax rate for a median earner to its lowest level since 1975. However, the overall tax burden is still expected to rise due to the continuation of a freeze on income tax thresholds up to 2028.

• In a surprise move, the government announced the higher rate of capital gains tax (CGT) on residential property will be reduced from 28% to 24% from this April. The Chancellor said this will in fact increase the overall amount of CGT that is paid in the UK.

• A series of tax reliefs were abolished to help fund the government's latest tax cuts. These include multiple dwellings relief on property transactions, (for transactions effective after 1 June 2024) and the favourable tax regime for furnished holiday lets, from 6 April 2025. The 'non-dom' tax status will be replaced with a system whereby new arrivals to the UK pay the same tax as everyone else after four years, from 6 April 2025.

• To raise further money the government is introducing a new levy on vaping, applying a one-off increase in tobacco duty and increasing the air passenger duty (APD) paid by business class flyers. However, the freezes on alcohol duty and fuel duty will continue.

Savings & Investments

• The government will create a new ‘British ISA’ which will provide an additional £5,000 tax-free allowance, on top of the existing £20,000 annual ISA allowance, for the public to invest exclusively in UK companies. The government will consult on the details, so you won’t be able to take advantage of this immediately.

• National Savings & Investments (NS&I), the state-owned savings bank, will launch a new 'British Savings Bond' offering a guaranteed rate for three years for investments between £500 and £1 million, available to savers from this April. The interest rate attached to the bond is yet to be revealed.

Pensions

• The Chancellor said the government will force local authorities and defined contribution pension funds to disclose how much they have invested in UK shares. UK pension funds currently invest an average of just 4% of their assets in UK shares. This reflects the significance of the UK market relative to the size of the global market without any ‘home bias’.

Businesses

• The VAT registration threshold for businesses will increase from £85,000 to £90,000. This follows a seven-year freeze to the threshold.

Family

• In a boost for parents, the threshold to start paying back child benefit will increase in April from £50,000 to £60,000 and child benefit will no longer need to be repaid in full until earnings exceed £80,000. In the meantime, the government will consult on moving to a household system of means testing child benefit from April 2026. It is not clear whether pensions contributions will work in the same way to avoid the higher effective tax rate under the new system. 

Services

• A £2.5 billion day-to-day funding boost and £3.4 billion in capital investment for the NHS will help unlock £35 billion in productivity savings over the next parliament by harnessing technologies such as AI, the Chancellor said.