Summary of The Spring Budget 2024

On March 6th, the Chancellor of the Exchequer, Jeremy Hunt, presented his 2024 Spring Budget to parliament.  Here are the main takeaways and how they could affect you:

Pensions

With the Finance Act 2024 being now in force, the Lifetime Allowance is abolished with effect from 2024/2025 tax year. Three new allowances are to be applied instead. The changes are complex with some of the legislations still needing to be corrected via regulations. From 2024/2025 tax year, the following key points apply:

The Lump Sum Allowance (LSA) of £268,275 which covers tax free cash.

Lump Sum and Death Benefit Allowance (LSDBA) of £1,073,100, this covers the totality of lifetime tax-free cash, severe ill-health lump sums and tax-free death benefit lump sums on death under age 75.

Any excess over these amounts are taxed as income.

Separate Overseas Transfer Allowance of over £1,073,100 with a 25% overseas transfer charge applying to the excess in situations where this charge is not triggered in its own right. 

National Insurance

From 6th April 2024, the main rate of employee Class 1 National Insurance Contributions (NICs) payable on earnings between £12,570 and £50,270 reduces from 10% to 8%. This follows the previous reduction from 12% to 10% with effect from 6th January 2024.

For self-employed people, with effect from 6th April 2024:

The main rate of Class 4 NICs now reduces from 9% to 6% for those with profits between £12,570 and £50,270 in 2024/2025, this has been reduced further from the previous announcement which was from 9% to 8%.

As previously announced, the requirement to pay Class 2 NICs ends for most self-employed people – State Pension entitlement will be linked to class 4 NICs.

Those with profits between £6,725 and £12,570 will continue to get NI credits to build State Pension entitlement.

Should you be Self-employed but have profits below £6,725, continue to pay voluntary Class 2 NICs at the current rate of £3.45 per week in 2024/2025 to build up your State Pension Entitlement.

Taxation

There is to be no changes to the income tax bands and thresholds for the 2024/2025 tax year.

The income threshold at which the High-Income Child Benefit Charge (HICBC) starts to be charged will increase from £50,000 to £60,000. The rate at which the HICBC is charged will also be halved from 1% of the Child Benefit payment for every £100 earned above the threshold, to 1% for every £200.  This means that the Child Benefit will not be withdrawn in full until individuals earn £80,000 or higher.

With affect from 6th April the annual Dividend Allowance will reduce from £1,000 to £500. The rates of income tax that will apply to these dividends will not change.

With effect from 6th April 2024, the higher rate of Capital Gains Tax (CGT) for residential property disposals that do not qualify for Private Residence Relief will be cut from 28% to 24%.  The lower rate will remain at 18% for any gains that fall within an individuals Basic Rate Band.

As previously announced, with effect 6th April 2024 the CGT Annual Exempt Amount reduces from £6,000 to £3,000.

State Pension

As previously announced, the New State Pension will be increased by 8.5% on 6th April 2024 in line with the full Triple Lock, from £203.85 to £221.20 per week.

The old State Pension increases on 6th April 2024 from £156.20 to £169.50 per week.