MONTHLY NEWSLETTER – APRIL 2024

1 April 2024

The Budget – has the chancellor given enough to stop the likelihood of a Labour government? We look at what the budget means for investors…

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Budget 2024 – Key points at a glance

Winners of the latest budget?

In essence, the ‘winners’ were individuals in the middle-income bracket, parents earning between £50k and £80k, higher rate taxpayers who own second homes, and investors who already maximise their ISAs. Conversely, the ‘losers’ included owners of holiday rental properties, non-domiciled individuals, the extremely wealthy, and retirees. Here’s a breakdown of what you need to know:

Who will benefit?

Workers will see National Insurance cuts. While this may not be as popular as Income Tax reductions in Budget discussions, an additional 2p was trimmed off NI. For someone earning £40,000 annually, this translates to a saving of £549 per year, in addition to cuts implemented in January. Higher rate taxpayers will save £754. Combined with January’s reductions, the average earner stands to save around £1,000 annually. Middle earners will benefit more than lower earners, although for the highest earners, this benefit will be offset by frozen tax thresholds.
Some families will receive a boost in Child Benefit. If any adult in the household earns over £50,000, their child benefit gradually reduces and stops entirely at £60,000. Starting April 6th, this threshold will increase to £60,000, allowing households where the highest earner earns less than this to receive full child benefits. Benefits will decrease progressively up to £80,000 and cease beyond that. It’s crucial for non-working partners to claim child benefits in their name to accrue National Insurance credits toward a future State Pension.
Higher rate taxpayers planning to sell a second home will benefit from a reduction in capital gains tax from 28% to 24% starting April 6th.

Who will be adversely affected?

Pensioners who are not employed will experience no relief in Income Tax, and there were no breaks provided. However, the ‘Triple Lock’ will lead to a weekly increase of £17.35 in the full new State Pension to £221.20 from April.
Non-domiciled individuals will face changes as the tax regime will begin to tax residents on income and gains in trusts after residing for four years starting April 6th, 2025.
Owners of holiday rental properties will no longer receive tax allowances for furniture spending and mortgage payment relief from April 2025. This might lead to a surge in sales for furniture retailers as owners spruce up their properties before the changes take effect.
All taxpayers will be impacted by frozen tax thresholds until 2028. Although this might seem dull, it will significantly affect individuals’ finances as inflation increases income over the next four years while tax thresholds remain stagnant, leading to more income being taxed.

What else is on the horizon?

A NatWest float is expected, allowing individuals to purchase shares in the bank as the government plans to divest its ownership acquired during the 2008 bailout.
There’s talk about a British ISA being developed, which would allow individuals to invest up to £5,000 annually in UK-listed shares (in addition to existing £20,000 allowance).
The Chancellor shared an Office of Budget Responsibility (OBR) view forecasting inflation falling below the 2% target soon, which bodes well for mortgage holders and debtors, leading to lower interest rates this year.

Anna Griffiths – Technical Manager Clear Financial Advice.