Spring Budget 2024

In what was a lively hour in Westminster, the Chancellor of the Exchequer delivered his 2024 Spring Budget on Wednesday 6th March. With a General Election looming this was arguably the last opportunity for the current government to offer up some fiscal relief to the electorate.

With no new or significant announcements on Pensions, Inheritance Tax and Income Tax, we roll into the new tax year with the majority of the existing framework in place or already announced. So, what does this mean for Prosperis’ clients?

The current tax year-end deadline is fast approaching, and we encourage you to act quickly with any actions and bring to your attention the long Easter weekend in the days before the deadline which includes 31st March, being a popular date for company trading year ends.

As with any change in legislation, it is important to consider whether you may be affected by any of these announcements, therefore, we encourage you to speak with your Prosperis adviser or get in touch with us if you would like to understand how Prosperis can help.  Our contact number is 01423 223640 or you can email us at advice@prosperis.co.uk

Income Tax

The personal allowance remains unchanged at £12,570. With basic rate tax (20%) applying to total income up to £50,270, higher rate tax (40%) to £125,570 and additional rate tax (45%) beyond this, we would encourage everyone to consider their individual position, particularly where income increases take you beyond these thresholds.

Where you have control over what you can draw, particularly from your own business or a pension in drawdown, you may want to make adjustments to manage the payment of unnecessary tax.

We will discuss the pension savings regime later, however, use of individual or employer contributions to a personal or workplace pension continues to provide an efficient way of managing your income tax as well as saving for retirement.

National Insurance Contributions

As announced in the last Autumn Statement, a 2% reduction in National Insurance for employees and the self-employed was implemented in January 2024. This has been further extended from 6th April 2024 by another 2% meaning Employees Class 1 NICs reduce from 10% to 8%, whilst Self-Employed Class 4 NICs reduce from 8% to 6%

High Income Child Benefit Charge (HICBC)

Citing the imperfections in the system and proposals examine further reform this after consultation a short-term fix to the current rules comes into place from 6th April 2024.  Therefore, the HICBC will now be £60,000 and taper by £1 for every £200 of income up to £80,000 of the highest earning parent. (Note the income includes the value of any Benefits in Kind).

Where you remain impacted, pension contributions could be used to manage your entitlement to Child Benefit.

Dividends

The individual allowance will reduce from £1,000 to £500 from 6th April 2024.

Capital Gains Tax

A reduction in the higher rate for residential property gains from 28% to 24% comes into force from 6th April 2024.  Other than this, the individual annual exemption will reduce from £6,000 to £3,000 from 6th April 2024.

Stamp Duty and other Property Taxes

The banding for stamp duty remains however, the preferential Furnished Holiday Let tax regime is to be abolished from 6th April 2025. Also ending is the stamp duty land tax relief associated with the purchase of multiple dwellings in a single transaction.

Inheritance Tax

No changes to the thresholds were made, meaning the current freeze on the Nil Rate Band & Residential Nil Rate Band remains at £325,000 & £175,000 respectively. Therefore, other than a number of administrative items the current system remains.

Pensions

Following on from the announcements that sees the Lifetime Allowance abolished from 6th April 2024, there were no new items regarding pensions and associated tax benefits.

With no changes to the annual allowance, you can save up to £60,000 into your pensions in the 2024/25 tax year. Coupled with Carry Forward going back to the 2021/22 tax year, this provides the opportunity for pension funding up to £200,000 over the four tax years.

As we enter into the new tax year, the receipt of your tax-free cash entitlement, more technical known as the Pension Commencement Lump Sum (PCLS), becomes the focus of attention.  Care needs to be taken where ALL new and historic receipts of PCLS exceed £268,275. Given this includes benefits from both Defined Benefit (Final Salary) and Defined Contribution schemes, you are encouraged to seek advice when accessing any pension going forward.

Investments

The government is keen to ensure investments into British companies and has confirmed requirements for large UK pension funds to disclose what proportion of their assets are allocated to UK listed companies.

Further, a consultation into an extension to the Individual Savings Allowance (ISA) regime with the proposal to introduce a British ISA was announced. This offers a further £5,000 allowance but there is no timeline as to when this will become available with the consultation period running to 6th June 2024.

Those old enough to remember will recall the Single Company Personal Equity Plan (PEP) introduced in 1992. The British ISA appears to emulate this. For now, we await the outcome of the consultation and associated details.

In the meantime, the main ISA subscription limit of £20,000 continues into the new tax year along with the those for the Lifetime ISA (£4,000) and Junior ISA (£9,000). In addition, the administrative changes announced in November 2023 come into effect from 6th April 2024 meaning that:

•  It will be possible to make multiple subscriptions to the same type of ISA in a tax year. Currently the rule is one ISA of each type, each tax year.

• Partial transfers of current tax year ISAs will be possible. At present, the entire subscription must be transferred.

• You will no longer need to complete a new ISA application for an existing ISA that received no subscription in the previous tax year.

• The range of investments for the Innovative Finance ISA will be extended.

There are no changes to the allowances on investments into VCT & EIS Schemes meaning that 30% income tax relief on investments into qualifying companies of £200,000 (VCT) and £1,000,000 (EIS) also remains.