The Spring 2024 Budget has been announced by Chancellor Jeremy Hunt, setting out the UK Government’s key policies around taxation and spending.
How will the changes affect you? Here at Reeves, we have taken a closer look at the new budget and the potential impact on financial planning.
Tax
The Chancellor’s headline announcement was a cut for National Insurance contributions for employees, this will reduce from 10% to 8% in April. For the self-employed, the cut will be from 8% to 6% in April.
In other key tax changes, the higher rate of property capital gains tax will be reduced from 28% to 24%. Stamp duty relief for those purchasing more than one dwelling in a single transaction, known as Multiple Dwellings Relief, is getting abolished. The Furnished Holiday Lettings regime is getting abolished.
Impact
For most people, the cut in the National Insurance will be the significant change. For the average employee, this change will bring about savings of around £450 a year. In the case of the self-employed, this change will bring about savings of around £350 a year.
Reeves recommends
For those who do not require this extra money in their pocket – we recommend looking at new regular savings options for retirement.
Pensions
The state pension will increase by 8.5% in April because of the triple lock. The Government also reiterated their commitment to the Lifetime Pension, whereby people will be allowed to choose the Pension their employer pays into.
Defined contribution schemes will be required to publicly disclose how much they have invested in UK companies.
Impact
Triple lock planning will be worth up to £900 a year for those on the state pension.
A lifetime pension will allow people to keep the same pension throughout their working life. This could boost competition in the workplace pension market, and deal with the issue of lost pension pots. The Government is aiming to increase the engagement of people with their pension planning.
Reeves recommends
If you have any concerns about retirement planning, get in touch with us.
The Economy
At the time of the Budget announcement, inflation is at 4%. The Office for Budget Responsibility is forecasting that inflation will fall to below 2% in the next few months.
The forecast for UK GDP growth is 0.8% in 2024, and 1.9% in 2025.
Impact
A fall in inflation could lead to a further decline in interest rates.
Savings
A new British ISA is to be introduced, allowing £5,000 annual investment into UK businesses. This includes all the tax advantages of existing ISAs and allowances will be on top of existing allowances.
A new British Savings Bond, delivered through NS&I, will offer a guaranteed rate that is fixed for three years.
Impact
There will be more options in terms of retirement planning, as clients will be able to invest an additional £5,000 through the British ISA allowance. However, this will be restricted to investment in UK businesses.
Reeves recommends
At Reeves, our investment team recommend a globally diversified approach to investment. A British ISA won’t allow for a globally diversified investment.
Benefits
The High Income Child Benefit Charge threshold is to rise from £50,000 to £60,000 in April, with the top of the taper where its withdrawn raised to £80,000.
From April 2026, the High Income Child Benefit Charge will be moved to household based income.
Impact
This change will stop 170,000 families paying this charge, according to the Government.
In conclusion, the potential impact of the Spring Budget will vary depending on your own unique circumstances.
At Reeves, our team of experts are always ready to help our clients navigate any changes to pensions and investments. If you have any questions regarding the impact of the budget on your pension, do not hesitate to contact our Advice Team.
Alternatively, if you are not yet a client of Reeves and have questions about the Budget and your pensions, you can book a free call with us to discuss how we can assist you in planning your retirement.
Our team will be happy to help you make the most of the changes and maximise your pension contributions.
The articles are for information only and should not be construed as advice or a recommendation. Please seek independent financial advice before taking any action. No action should be taken without independent professional financial advice as any actions on your pension may be irrevocable and have a big impact on your income in retirement.
Note that investments can go down as well as up and you may not get back the full capital invested.