JSP Financial Services Limited

7 March 2024

The Spring Budget 2024

The following details may require amendment once the “fine detail” is released.

From the personal financial planning point of view, there was little in the Budget as expected – the low growth and high debt in the UK simply does not permit large tax cuts.

The Main Points

Income Tax

No change to income tax rates and reliefs which are set to remain frozen until 2028.

National Insurance

National Insurance rates are being cut again from April, with the main rate falling to 8% for employees following the cut from 12% to 10% from January.

The Class 4 NIC rate for self employed is reducing from April 2024 from 9% to 6%.

The High Income Child Benefit Charge

The High Income Child Benefit Charge is changing from 6 April 2024. Currently, if one person in a household earns more than £50,000 then Child Benefit is reduced by 1% for every £100 above this limit, so that the Benefit falls to zero once earnings hit £60,000. From April, the charge will not kick in under earnings reach £60,000 and the benefit will then reduce by 1% for every £200, so will not be withdrawn in full until individuals earn £80,000 or more.

The government is also consulting on changes to administer the High Income Child Benefit Charge on a household rather than an individual basis from April 2026.

Individual Savings Accounts (ISA)

In addition to the £20,000 limit, a new UK ISA with a £5,000 limit will be introduced with investment solely in UK shares. The government is consulting on the details between now and June.

British Savings Bonds

NS&I (National Savings & Investments) will launch a product offering a guaranteed interest rate fixed for 3 years. The details are expected early in April.

Pension Plans

Pension Trustees and Providers of workplace defined contribution schemes will need to publicly disclose for their default fund how much they invest in UK businesses compared to overseas. Similar requirements will also be placed on Local Government Pension Scheme funds.

New powers will also be given to The Pensions Regulator and the Financial Conduct Authority to prevent poorly performing workplace schemes from accepting new business from employers. These requirements are expected from 2027, with the aim of encouraging UK investment and improving returns.

Capital Gains Tax

Some light relief for property owners in a move to encourage sales – the higher rate of Capital Gains Tax is being reduced by 4%. This means that the Capital Gains Tax rates for residential property sales from April will be 18% (basic rate) and 24% (higher rate).

Abolition of Furnished Holiday Lettings Tax Regime From April 2025

The exemption from finance cost restriction rules, the beneficial capital allowance rules, the ability to access a 10% rate of Capital Gains Tax on gains and the inclusion of relevant UK earnings when calculating maximum pension relief will all be removed.

Inheritance Tax

Despite all hopes, no changes have been announced.

The Other Main Points At A Glance

Continued fuel duty freeze and the temporary 5p cut to remain,

The VAT threshold is to rise from 1 April 2024 from £85,000 to £90,000.

The windfall tax on oil and gas companies is extended to 2029.

The Non-Domicile tax regime will be abolished and replaced by a new residency system from April 2025.

The above provides a brief snapshot only and decisions should not be made based on this summary. Full details will need to be provided by the Treasury. Different tax rates may apply in Scotland and Wales.

23 November 2023

The Autumn Statement At A Glance

Chancellor Jeremy Hunt provided his Autumn Statement on Wednesday. It has been welcomed in a fairly muted way by the media, with the main comments being that it hasn’t given enough away through tax perks, perhaps conveniently forgetting that the State (that is the tax payer - current and future) has given away huge sums over the last few years through Covid and energy support schemes.

In truth, the Chancellor has very limited room for manoeuvre given continued inflation and sluggish growth.  The Office of Budget Responsibility (OBR) has forecast that inflation will fall very gradually from 4.6% currently to 2.8% by the end of 2024, whilst it has downgraded growth expectations with new forecasts for the economy (the figures in brackets are the OBR’s forecasts in March of this year):-

2023: GDP rises by 0.6% (a fall of 0.2%)

2024: GDP rises by 0.7% (a rise of 1.8%)

2025: GDP rises by 1.4% (a rise of 2.5%)

It must be said that the OBR seem to be wrong more times than they forecast correctly.

The main bullet points announced in the Statement are:-

Income Tax Allowances

•  The tax free personal allowance of £12,570 and the higher rate tax threshold of £50,270 remain frozen until 2028, with the additional rate threshold staying at £125,140.

National Insurance

• Employee NIC will be reduced from 12% to 10% on earnings between £12,570 and £50,270, effective from January.
• For the self employed, Class 4 NIC will fall from 9% to 8% on the same band as above, whilst Class 2 NIC will be abolished from 6 April 2024. Where profits fall below £6,725, the self employed can currently elect to pay Class 2 NIC voluntarily to qualify for contributory benefits including the State Pension – this will still be able to be done at the rate of £3.45 a week.

State Pension 

• This will rise from next April by 8.5%, maintaining the “triple-lock”. The new State Pension will therefore rise from £203.85 a week to £221.20 a week from April next year.

Increases To Benefits 

• These will rise by 6.7%.

Living Wage Increase 

• For those over 21, the National Living Wage will rise from April 2024 from £10.42 an hour to £11.44 an hour.

Other (Already Announced) 

• The dividend tax allowance is being reduced from £1,000 to £500 from April 2024.
• The current Capital Gains Tax exemption of £6,000 will reduce to £3,000 from April 2024.
• Inheritance Tax thresholds remain frozen.

Businesses

• UK businesses will be able to continue to write off (fully expense) the full cost of qualifying plant and machinery in the year of investment.
• The business rate support package will continue, as will the 75% relief for retail, hospitality and leisure.
• Targeted support announced (details to follow) to improve investment in digital technology, the green industry, life sciences and advanced manufacturing industries.

Pension Saving

• For workplace pension schemes (“auto-enrolment” schemes etc), currently the employer decides the scheme it offers its employees. There will be consultation on giving employees the option to have a “pension for life” whereby the employer will be required to pay into a pension of the employee’s choice. The idea is to simplify the pension holdings of employees, particularly if they move jobs frequently.

The Lifetime Allowance

• It was confirmed that the Lifetime Allowance for pension savings (£1,073,100 unless protection applies) is being abolished from 6 April 2024. It is still not known at this stage what will replace it, the speculation being that there will be a tax free cash sum allowance fixed at £268,275 (25% of £1,073,100) and a lump sum and death benefit allowance fixed at £1,073,100 to incorporate both the tax free cash sum and any lump sum paid on death, with any excess taxed at the recipient’s marginal tax rate.
• There does however seem to be a reprieve for the taxation of inherited pensions (rather than lump sum payments) where a member dies before age 75. They will therefore remain tax free.  

ISAs

• Maximum ISA contributions remain the same - £20,000 for the ISA, £9,000 for the Junior ISA and £4,000 for the Lifetime ISA.
• Currently only one type of each ISA (Stocks & Shares ISA and Cash ISA) can be held in a tax year, but from April next year it will be able to have multiple ISAs in the same tax year within the overall maximum.
• The minimum age qualification for adult ISAs will however be set at age 18 (currently 16 for Cash ISAs).
• There will also be some easements relating to the transfer of ISAs between providers.

Public Offer Of Shares In NatWest Bank

• The State owns a significant portion of NatWest following the bailout during the financial crisis, the aim now being to return ownership to the public via a share offering. Details will come out in due course.

The above provides a brief snapshot only and decisions should not be made based on this summary. Full details will need to be provided by the Treasury via the Finance Bill. Different tax rates may apply in Scotland and Wales.

TAX TABLES 2024/25

 Income Tax

Notes

(1): Personal Allowance: Not everyone will have the benefit of the full personal allowance. For anyone with “adjusted net income” (roughly total gross income less gross pension contributions made) of over £100,000, the personal allowance is reduced by £1 for every £2 of income above £100,000 – so no personal allowance is available if income exceeds £125,140 for 2024/25.

 (2): Personal Savings Allowance of £1,000 is available for basic rate taxpayers, reduced to £500 for higher rate taxpayers (40%) and nil for additional rate taxpayers (45%).

(3): Starting Rate for Savings Income. In addition to the Personal Savings Allowance, other non-dividend savings income (so usually bank/building society interest) is taxed at 0% up to £5,000 – this is not available if taxable income from other sources (including dividends) exceeds £5,000.

(4) The £500 dividend allowance is taken into account when determining the tax band.

(5) Transferrable Marriage Allowance: This was brought in from 6 April 2015 - a transferrable tax allowance available to spouses/civil partners born after 5 April 1938 of 10% of the personal allowance. It allows a spouse/civil partner who does not use his/her full personal allowance to transfer up to £1,260 for 2023/24 and £1,260 2024/25 of their personal allowance to their spouse (as long as he/she is not liable to income tax above the basic rate) and so receive a tax reduction of 20% of the transferred amount (worth up to £252 in tax saving for 2023/24 and 2024/25). A claim can be backdated to previous years.

(6) Property income (before expenses) within £1,000 is exempt. If gross property income is above £1,000 individuals can choose between deducting £1,000 or using actual expenditure.

Capital Gains Tax

• The rate of capital gains tax for individuals above the exemption of £3,000 is 10% for the basic rate and 20% for the higher rate.  In determining which rate applies, chargeable gains are added to taxable income. Where the total is below the higher rate tax threshold (£50,270 for 2024/25) then the chargeable gain is taxed at 10%, anything above taxed at 20%.
• The rates of capital gains tax that apply on sale of a residential property (other than your main residence which does not involve Capital Gains Tax usually- but see below) such as second properties or buy-to-lets remain at 18% and 24% depending upon which tax band the gain falls in.   
• Private Residence Relief: Prior to 2020, relief from capital gains tax could be claimed by individuals who let out a property that is, or had been in the past, their main residence. From April 2020, this relief is only available to individuals who share occupancy with a tenant.
• Additionally, currently there is a final period exemption from capital gains tax on the main residence on gains made within the last 9 months of home ownership (where for example the owner is not occupying the premises).
• Business Asset Disposal Relief: This provides reduced capital gains tax where certain qualifying conditions are met over a 24 month period.

ISA Limits

Lifetime ISA: Available to anyone 18-40 who can contribute up to £4,000 pa. Contributions made before age 50 qualify from a 25% bonus from the Government. Funds from Lifetime ISAs can be used to buy a first home at any time following 12 months from opening, or can be withdrawn from age 60. Earlier access involves loss of bonus and penalties.

Inheritance Tax

A surviving spouse/civil partner can claim any unused proportion of an earlier deceased’s nil rate band.

 An additional nil rate band of £175,000 is available where the main residence passes on death to direct descendants such as children and grandchildren. As with the existing nil rate band, any unused additional nil rate band can be claimed on death by a surviving spouse/civil partner. Anyone with net assets above £2 million will see the additional nil rate band reduced by £1 for every £2 above £2 million so there will be no additional relief where net assets exceed £2.35 million. The residence nil rate band will be available where a person downsizes or ceases to own a home on or after 8 July 2015 where assets are passed on death to direct descendants.

Some exemptions to Inheritance Tax:-

• Gifts between spouses/civil partners.
• Gifts of up to £3,000 per tax year (can carry forward for 1 year if not used).
• Wedding gifts of £5,000 to each child or £2,500 to each grandchild or £1,000 to any other person.
• Regular gifts out of income (there are conditions).

Taxation Of Discretionary Trusts 

 * The lower rates apply to the total combined income including dividends.  

Pension Contributions

(1): Excess over this amount is subject to a 25% tax charge if taken as taxable income or 55% tax charge if taken as a lump sum. An individual’s allowance may be higher if protection applied for.

(2): Reduced by £1 per £2 of adjusted income in excess of £260,000. Those with “adjusted income” (total taxable income plus the value of pension contributions) of more than £260,000 and “threshold income” (total taxable income) of more than £200,000 will be subjected to a tapered annual allowance. The annual allowance will be reduced by £1 for every £2 of income in excess of £360,000, with a maximum reduction down to £10,000.

(3): Reduced annual allowance where pension plans have been flexibly accessed.

(4): Refers to income tax payable where annual allowance exceeded.

National Insurance Contributions

(1): Most businesses can claim up to £5,000 of employer NIC under the NIC Employment Allowance.

National Minimum Wage

Stamp Duty Land Tax

(1): Different rates apply for Wales and Scotland.

(2): A 3% surcharge applies to all second and additional residential properties on transactions of £40,000 or more.

(3): First time buyers paying £625,000 or less for a residential property pay no stamp duty land tax on up to the first £425,000. For purchases between £425,000 and £625,000, stamp duty land tax of 5% is paid on the excess over £425,000.

Landlords – Buy To Let

1) Tax relief on mortgage interest is restricted to basic rate for mortgages on buy to let properties, the restriction having been phased in over 4 years from April 2017. It is now fully operational.

2) Landlords of furnished properties cannot now deduct 10% of their rent from profit to account for wear and tear. Since April 2016, only maintenance costs actually incurred can be deducted.

 3) The Furnished Holiday Lettings tax regime will be abolished from 6 April 2025, impacting the exemption from finance cost restrictions, the beneficial capital allowance rules, the 10% Capital Gains Tax on gains.

4) From April 2020, if capital gains tax becomes payable on sale of residential property (buy to let or second property) then the taxpayer must pay the tax within 60 days of completion.

Freezing Of Allowances Announced In The Budget Of Spring 2021

• Income Tax personal allowances and thresholds now frozen  until 2028.
• Inheritance Tax nil rate band and main residence nil rate band will remain at £325,000 and £175,000 until 2028.
• The VAT threshold has been increased from  £85,000 to £90,000 from 1 April 2024.

State Pension

These rates are subject to eligibility criteria.