We dissect the key announcements of the Spring Budget relevant to personal finance and investments.
March 6, 2024
Likely to be the last major fiscal event before the next general election later in the year, UK Chancellor Jeremy Hunt has delivered his Spring Budget, which sets out the Treasury’s taxation and spending plans for the next financial year.
With an impetus on “more investment, more jobs and lower taxes,” Hunt put tax cuts at the heart of his Budget in an attempt to lower the tax burden on individuals and boost long-term economic growth. Key announcements include cuts to National Insurance, the introduction of a UK ISA and the abolishment of the UK “non-dom” tax system.
Hunt also provided updates on the outlook for UK inflation, with the Office for Budget Responsibility (OBR) forecasting inflation to fall below the government’s target of two percent by the end of May 2024.1
The Spring Budget builds upon the 2023 Autumn Statement, in which Hunt announced cuts to National Insurance, rises to the minimum and living wage and a triple-lock boost to the state pension, among other measures. You can find a breakdown of the key changes in our 2023 Autumn Statement response.
Here, we dissect the key announcements of the Spring Budget relevant to personal finance and investments, before giving the views of Guy Foster, our Chief Strategist, on the implications for the UK economy.
Announcements:
Impact:
Planning opportunities:
Announcement:
Planning opportunity:
Impact
Impact: Furnished holiday lets benefit from more generous tax treatment in comparison to other let properties, such as:
Announcement: The government will launch a consultation on crypto-asset reporting.
Commenting on the outlook for the UK economy, Guy Foster, chief strategist at RBC Brewin Dolphin, said:
“The Office of Budget Responsibility (OBR) forecast that UK GDP growth is expected to recover modestly in 2024 and more significantly in 2025. This follows two years of economic activity weighed down by inflation and rising interest rates. The economy entered recession, but it was a technical recession, which may yet be revised away as inflation has fallen faster than had been anticipated whilst employment remains strong.
Against this backdrop, the political necessity of cutting taxes ahead of an election met the economic reality of having relatively little scope to do so. Signs of largesse in this budget could be self-defeating if markets feared a return of inflation, as it would cause mortgage rates to rise.
A reduction in National Insurance will boost the incomes of the vast majority of employees, albeit quite modestly for many. However, those giveaways should be seen in the context of frozen tax thresholds that have pushed many taxpayers into higher tax rates.”
The Spring Budget could be the Conservatives’ last fiscal event before an election and were there to be a change in government later this year, the new ruling party would surely set about putting their own stamp on the country’s finances.
For individuals navigating the impact of these ever-changing rules on their financial plans, diversity in the structures in which they hold wealth is important. As we’ve seen with ISAs this year and pensions in 2022, changes in rules may favour one structure over another, so remaining diverse in your allocation allows for an adaptable plan.
For those seeking to manage this impact, there remains a range of tools available; from ISAs and pensions to international bonds and family investment vehicles, as well as a number of schemes that reduce tax liabilities such as Enterprise Investment Schemes and Venture Capital Trusts.
1 Office for Budgetary Responsibility
2 https://www.gov.uk/government/statistics/statistics-on-non-domiciled-taxpayers-in-the-uk/statistical-commentary-on-non-domiciled-taxpayers-in-the-uk–2
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