Your 2024 Budget Briefing

So our dear chancellor Jeremy Hunt delivered his second budget yesterday afternoon. What does it mean for your finances and why should you care?

Here’s my (brief) summary & what I hope will turn a dry subject into something a little bit more entertaining.

1. National Insurance is going down 🟡

Good news here and with effect from 6th April 2024 the main rate of National Insurance is going down.

Jeremy already tinkered with this in his Autumn Statement but has announced further cuts so that more of our hard-earned money stays in our pocket (what a true gentleman).

The cynic in me would argue that playing with National Insurance is a simpler and less costly change for the government compared with reviewing Income Tax.

Remember that you don’t pay National Insurance once you reach State Pension Age, but depending on your income position you may still have to pay Income Tax.

2. Child Benefit improvements 🟢

At the moment if one parent in a household has ‘adjusted net income’ (don’t stress what this means) above £50,000 then you start to lose valuable Child Benefit payments.

The good news is this is now going up to £60,000 and there are also changes planned so that the assessment will look at your entire ‘household’. At the moment the system is grossly unfair and penalises households where one member earns over £50,000, even if the other partner doesn’t pay any tax whatsoever.

Consider a couple, each with an income of £49,950 who wouldn’t lose the benefit, but another couple with incomes of £20,000 and £50,050 would. Hardly seems fair does it? Jeremy has proposed to address this issue.

Keep in mind also that the ‘income’ considered isn’t simply your gross salary or earnings. In short, if you make pension contributions then this decreases the amount you are considered to ‘earn’ when being assessed for Child Benefit charges. Another happy reason to make pension contributions.

3. A new ISA allowance – ‘British ISA’ 🟡 I’m not sure to what extent this will catch on but will look forward to seeing how things develop.

In theory it means you have your old ISA allowance of £20k per tax year and can also park a further £5k in a ‘British ISA’.

Recap that the benefit of an ISA is to protect your wealth from taxation on interest income, dividends and capital growth so this seems a good thing on the cover.

However the caveat is that it’s used to support British businesses so this should be carefully balanced against having a well-diversified global portfolio and not having all your proverbial eggs in one basket!

The measure is largely government self-serving and follows similar trends to the proposed workplace pension changes introduced by Jeremy last year. If you missed that then here’s the episode I recorded on these proposals and I explain what you need to be aware of.

4. VAT threshold is going up 🟢

Some relief for small business owners with a long overdue increase to the threshold where VAT registration is required. It’s going up from £85k to £90k.

5. Changes to Capital Gains Tax for landlords 🟢

If you’re selling a property that’s not considered your ‘primary residence’ than you pay Capital Gains Tax. At the moment the rate of Capital Gains Tax you pay is higher on property sales compared with standard investment portfolio sales, but Jeremy announced yesterday (perhaps to everyone’s surprise) that this will come down from 28% to 24% for higher rate taxpayers.

Remember also that the amount you can earn per tax year tax free on capital gains is going down, down, down. From April it’s a measly £3k per tax year. Quite the fall compared to the £12,300 level enjoyed as recently as March 2023.

➡️ In summary

It’s helpful to understand what Jeremy’s changes and proposals mean for your personal finances, but such changes are fairly immaterial in the long-run, so don’t get lost in the details.

Many are arguing the proposals don’t go far enough to swing any possible election result back in the favour of the Conservatives, but sensible investors should be immune to politics and short-term political plays.

Think of the budget as changing the short-term rules of the game, but the true success in your long-term planning comes from staring out the window and letting it all blow by.

Thanks for reading.

Benjamin

Benjamin Mitchell

Benjamin Mitchell

I’m a chartered financial planner that can help you plan for tomorrow and also live for today.

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