Against a backdrop of gloomy consumer confidence, continued cost-of-living challenges, and what is scheduled to be the last budget before the next general election, Chancellor Jeremy Hunt presented his Spring Budget to the Parliament with an array of measures aimed at “not higher GDP, but higher GDP per head”, suggesting a focus on productivity in the UK economy.
Here is a roundup of the key measures announced by the Chancellor.
Class 1 Employee National Insurance Contributions
The main rate for Class 1 Employee National Insurance Contributions (NICs) will be reduced by a further two percentage points to 8% from 6 April 2024 for earnings between the primary threshold and the upper earning limit.
This will give the average employee a boost to their take-home pay by £450 a year (or £900 a year when you consider the NIC cut announced in the last autumn budget).
- Employee Class 1 NIC – 8% (6 April 2024)
- Primary threshold – £12,571
- Upper earning limit – £50,270
Child benefits
The child benefit threshold – the level of income at which a parent starts to lose child benefit entitlements – will rise from £50,000 to £60,000, allowing more families to claim more child benefit from this April onwards.
The increase in the child benefit threshold will be accompanied by an increase of the taper from £60,000 to £80,000. This means the child benefit tax charge will be equal to the full amount of the child benefit received if an individual’s ‘adjusted net income’ is £80k or more.
Capital gains tax
To encourage more movement in residential property sales, the Chancellor announced a cut to the higher rate capital gains tax from 28% to 24%.
Pensions
In the Autumn Statement speech, the Chancellor promoted the concept of a ‘legal right’ for people to select a pension provider of their choice. The concept would allow employees to have a single pension pot which they can take with them when they change jobs, as opposed to starting a new pension pot with a new pension provider selected by their employer, each time they change jobs.
In the Spring Budget paperwork however, the Government now says that it is simply committed to ‘exploring’ the idea. It also says that it will only do this if it can ‘ensure’ it will produce better outcomes.
Disappointingly however, there was no mention of any auto-enrolment enhancements from the Chancellor’s Spring Budget statement.
Fuel duty freeze
Despite the push from the Treasury officials to raise fuel duty by at least 2p, the Chancellor announced he will maintain the freeze on the fuel duty for a further 12 months, until March 2025.
Alcohol duty freeze
The Chancellor also has confirmed the extension to the alcohol duty freeze until February 2025, a move which the Chancellor said will benefit 38,000 pubs across the UK.
‘British ISA’
To promote investment into UK businesses, the Chancellor announced a new ‘British ISA’ which will provide another £5,000 of annual tax-free investment in UK equities.
Mr Hunt claims the move will “ensure that British savers can benefit from the growth of the most promising UK businesses” while supporting those firms financially to expand.
Our thoughts
The Budget was largely aimed at families with NI cuts, changes to the child benefit threshold and high-income child benefit charge, and a drop in the higher rate capital gains tax for residential property.
The pickings were slimmer for businesses but there were still some announcements that will be of interest including alcohol duty freeze and promoting investments into UK businesses by way of the proposed new ‘British ISA’ and requiring pension schemes to disclose their UK equity allocation, with the long-term intention of directing pension funds to have a more UK bias in terms of fund allocations.
Ending on a more optimistic note, Mr Hunt stated that inflation in the UK will finally drop below the 2% target “in just a few months’ time” according to the latest forecast by the Office for Budget Responsibility! This would in turn allow the government to lower interest rates a lot sooner than originally envisaged.
How we can help
We’re passionate about helping businesses continue to look out for their employees while keeping costs down. If you and your business find some of the changes announced in the Budget Statement challenging or have any questions about how the changes announced impact your business, speak to our experts to discuss how we can support you.
You can read our summary of the last Budget here or read more information about unburdening your business from payroll and pension compliance here or read more about supporting your employees’ financial wellbeing, emotional wellbeing and physical wellbeing.
Amrik Birdi, Head of Operations at Growth Partners
Amrik has a wealth of knowledge in pensions having joined Growth Partners from KPMG where he was responsible for advising companies and trustees on independent DC provider procurement exercises, DC investment strategy review, DC pensions strategy review, automatic enrolment compliance, and meeting ongoing governance requirements. Amrik spent three years before this as a Pensions Guidance Specialist at Pensions Wise helping members understand their pension and retirement options, empowering them to take control of their retirement journey. With a Diploma in Regulated Financial Planning and Certificate in DC Governance, combined with a Degree in Economics, Amrik is a fully qualified pensions consultant and able to offer strategic support to our clients on their options for workplace pension schemes and auto-enrolment.