On March 6, 2024, Chancellor of the Exchequer Jeremy Hunt delivered his Spring Budget to Parliament. Mr Hunt declared it “a budget for long-term growth.” A notion that was reiterated by the emphasis on encouraging investment in the UK, supporting working people, and helping families across the UK with the cost of living.
Policy highlights include the widely anticipated reduction in national insurance, the abolition of non-domestic tax status, and new savings products designed to encourage more people to invest in UK assets.
The Budget also includes new investment in the NHS and a plan to bring public sector productivity back to pre-pandemic levels. It’s clear that the Conservative Government is focused on building a “high wage, high skill economy” while delivering “more investment, more jobs, better public services, and lower taxes.”
As the last Budget and potentially the last fiscal event before the looming general election, it’s clear that the Conservative Party has a fiscal vision for the UK—policies that they hope will play a strong role in the upcoming general election. But what does all this mean for you? Let’s examine the key announcements of the Spring 2024 Budget in a little detail.
OBR Forecasts
Mr Hunt’s Budget has made it clear that he and the Conservative Government believe the UK economy is recovering from the nadir of COVID-19 and the subsequent economic contraction.
The Office of Budgetary Responsibility (OBR) has forecasted that the rate of inflation will fall below the Bank of England’s target 2% level in “a few months’ time,” well before the previously projected autumn timeframe, adding that this was no accident and the direct result of sound money policies.
But there’s more. The Chancellor pointed out that the government is on track to meet both key targets: that state underlying debt must be falling as a percentage of the gross domestic product (GDP) by the forecast’s fifth year and that public sector borrowing must be below 3% of the GDP in the same period.
Also, borrowing looks set to fall below 3% of the GDP by 2025/26, and by the end of the forecast period, it represents the lowest level of annual borrowing since 2001.
Pivoting to growth, updated OBR projections have suggested that the UK economy will expand by 0.8% in 2024. This is marginally more than the autumn forecast. 2025’s growth rate has also been updated to 1.9%, compared to the previous estimation of 1.4%.
Cost of Living
Despite a favourable economic growth forecast, many UK households will still feel the cost-of-living squeeze throughout 2024. The good news is that the Spring Budget 2024 has outlined a series of measures to help people dealing with financial milestones. The measures announced include:
- An extension to the Household Support Fund at current levels for a further six months
- An extension on the cut on fuel duty for another 12 months
- An extension of the freeze on alcohol duty until February 2025
- An extension in the repayment period for new budgeting loans from 12 to 24 months
- The abolition of the £90 charge for a debt relief order
These simple measures will help people struggling with inflation and the cost of living as the UK economy rebounds from COVID-19 and the subsequent economic fallout.
Financial Flexibility
Alongside the cost of living the other key aspect of the 2024 Budget that many people keep a close eye on is how far their money will stretch. Therefore, it’s no surprise that personal taxation, savings, and pensions feature prominently in the Chancellor’s Budget.
The announcements can be broken down into a few different sections:
NI Contributions
Further changes to national insurance will take effect in April 2024. The main rate of employee NICs will be cut from 10% to 8%. Once combined with the 2p cut, which took effect in January, it is estimated to save the average salaried worker £900 per year.
Adding to this, a further cut from the main rate of self-employed NICs from the Autumn Statement has also been announced. This means that from April 6, 2024, the main rate of Class 4 self-employed NICs will reduce from 9% to 6%. Once combined with the abolition of the required Class 2 NICs, the average self-employed person will save £650 a year.
Child Benefits
People who receive child benefits have also been given a boost, with changes made to reduce what many see as unfairness in the system.
The most notable announcement is that the child benefit system will be modified to be based on household income rather than individual income. This change will take effect before April 2026.
However, from 2024, the threshold for the High-Income Child Benefit Charge will be raised to £60,000 from £50,000. This means that 170,000 families won’t need to pay this charge. Additionally, the rate of charge will also be halved, which means that child benefit in full will not be lost until an individual earns £80,000 per annum.
The government estimates that the Spring Budget’s evolution of the Child Benefit system will provide almost 500,000 families, giving them an additional £1,260 throughout 2024/25.
New Savings Products
To encourage UK savers, the 2024 Spring Budget outlined two new products to offer the fiscally responsible more choice to grow their savings.
The first is a new ISA, which includes a £5,000 annual allowance alongside the existing ISA allowance to encourage people to invest in UK-focused assets.
The second are British Savings Bonds, which will be delivered through National Savings & Investments (NS&I) in April 2024 and offer a guaranteed interest rate for three years.
Pensions
Mr Hunt’s Spring 2024 Budget also included plans to bring forward requirements for defined contribution pension funds to publicly disclose the breakdown of their asset allocations, including UK equities. The UK government will be working closely with the Financial Conduct Authority (FCA) to improve the current 6% investment in UK equities.
The Treasury also stated that they will consult with the FCA on the reporting requirements in the spring and that they plan to introduce “equivalent requirements” for local governments for the Local Government Pension Scheme as early as April 2024. As expected, this was the only real announcement concerning UK pensions.
However, Mr Hunt did reiterate that the state pension will rise by 8.5% in April. This equates to £221.20 a week for the full, new, flat-rate state pension (for those who reached state pension age after April 2016) and £169.50 a week for the full, old basic state pension for those who reached state pension age before April 2016.
ISAs and JISAs
Having been outlined in the Autumn Statement, the government continues to work towards bringing forward legislation to the end of the summer to allow people to invest in a diverse range of ISA investments.
ISA allowances will be frozen at £20,000 per tax year for the forthcoming tax year (6 April 2024 to 5 April 2025). JISA (or Junior ISAs) allowances and Child Trust Fund annual subscription limits will remain at 9%.
Taxation
Anyone who listened to the speech made by Mr Hunt will have, no doubt, noticed the emphasis the chancellor placed on the Conservative Party’s commitment to cutting taxes. But just how fanciful are these? Well, the new tax on tobacco and vaping products and reforming the tax treatment of non-doms aside, there were some key announcements in the spring budget sure to prick ears up.
For one, the Chancellor revealed that the Income Tax Personal Allowance and higher rate thresholds will remain at £12,570 and £50,270 until April 2028, though it’s important to note that rates and thresholds may vary in parts of the UK where Income Tax is devolved.
The standard nil rate Stamp Duty Land Tax threshold for England and Northern Ireland is £250,000 and £425,000 for first-time buyers, and it will remain in place until March 31, 2025. Additionally, the annual Capital Gains Tax (CGT) exemption will be reduced to £3,000 from April 2024.
There will also be no changes to inheritance tax (IHT) to take effect before April 6, 2025. The Chancellor announced measures to make the property tax system fairer by abolishing the Furnishing Holiday Lets tax regime, Stamp Duty Land Tax Multiple Dwellings Relief from June 1, 2024, and reducing the higher rate of CGT on residential properties from 28% to 24%.
Public Services
The government’s “landmark” Public Sector Productivity Plan, which aims to kickstart public sector reform and change the Treasury’s traditional approach to public spending, was given significant emphasis in the Spring Budget 2024.
Mr Hunt announced a £3.4bn investment to modernise IT systems, which it’s hoped will unlock £35bn worth of savings by 2030 and boost NHS productivity by as much as 2% per year from 2025/26 to 2029/30. It’s thought that this £3.4bn investment will:
- Modernise legacy NHS IT systems
- Improve the NHS app so that patients can confirm and modify appointments
- Pilot the use of AI to automate back-office functions
- Transfer paper to electronic patient records across all NHS trusts
- Upgrade more than 100 MRI scanners with AI functionality to improve care for more than 130,000 patients
But there’s more. Mr. Hunt has announced the NHS will receive £2.5bn in additional funding for 2024/25, helping the service reduce patient waiting times. That funding does not include an additional £800 million to boost productivity across other public services. This includes:
- £230 million for drones and modern technologies to free up police officers’ time for frontline work
- £75 million to roll out the Violence Reduction Unit model across England and Wales
- £170m for the Criminal Justice System, including £55m for family courts, £100m for prisons, and £15m to reduce the administrative burdens on the courts
- £165m for additional social care placements
- £105 million to build new, special free schools
Additional key announcements
In addition to sharing what the Conservative Party considers key areas that need to be addressed, 2024’s Spring Budget also did not neglect to cover what previous budgets, even governments, have historically alluded to or addressed.
These key announcements include:
- The introduction of a new duty on tobacco and vaping products in October 2026
- Boosting local growth through the continuation of the Investment Zones programme
- £1bn in additional tax relief for creative industries over the next five years
- Increased housing investment, including £124m at Barking Riverside and £118m to accelerate delivery of 750 homes for the Canary Wharf scheme
- £120 million for the Green Industries Growth Accelerator (GIGA)
- An extension to Freeport tax reliefs, extending to September 2031
Takeaways from the Spring Budget 2024
The Chancellor’s budget is optimistic. One that has been designed with future forecasting in mind while encouraging economic recovery and prosperity as the decade unfolds.
2024 may well prove to be one of the more crucial years for the Conservative Party in the 14 years since they took power from Gordon Brown’s Labour Government in 2010.
However, many sectors will be left disappointed. Few more so than the housing sector, which had campaigned for measures to help home buyers and mortgage borrowers.
The increased child benefit threshold will be welcomed by many families who are feeling the pinch of inflation. It’s also about time that the NHS benefitted from innovative technology, something that the £3.4bn is hoped to do.
The Conservative Party has played its economic hand. It remains to be seen if this will be enough to sway voters in the next election.
Interested in learning more about how Ward Goodman can steer your finances in the right direction? Get in touch with our accountancy and financial service team today.
