Spring Budget 2024 – What Can We Expect?

 

The Chancellor, Jeremy Hunt, will deliver his Spring Budget in the House of Commons on 6 March. While nothing is certain until the day, rumours are swirling about what his plan for the UK economy will include. 

 

Ahead of an election later this year, the government would not want to go to the electorate without offering some good news.

 

 

 

Initial thoughts are that there will be some cuts in Income Tax following similar cuts in National Insurance rates in the Autumn Statement 2023. However, both the Treasury and IMF have warned that the Chancellor does not have headroom to deliver such cuts.

 

With this in mind, here are some areas that may well be addressed.

 

Fiscal Drag

Although a reduction in income tax rates is unlikely, there is a thought that personal allowances could be increased or the freeze on allowances until 2028 lifted.

The standard personal tax allowance was £12,500 in April 2019 a mere £250 lower than the current allowance. Had it been raised in line with the consumer prices index it would now be approximately £15,000 since last April. 

Similarly, the higher rate tax threshold was £50,000 in April 2019 and would be over £60,000 after CPI increases today. This is of course dragging many taxpayers into the 40% tax rate bracket.

So, it’s fair to say the freezing of such limits is causing a significant fiscal drag and therefore some movement on these allowances would certainly help with the cost of living and put some money back in taxpayers’ pockets.

 

ISA Allowance Increase

April 2024 will see both capital gains exemption and dividend allowances halve to £3,000 and £500 respectively. This certainly will not help those with investments held outside tax-protected wrappers, such as ISA or Pensions. 

We did see the Pension allowance increase to £60,000 last year and therefore an increase in the ISA limit (7 years since the last increase) would be timely to help shelter funds from income, capital gains and dividend taxation. Could we see an increase limit to £30,000?

 

Increase of Child Benefit Threshold

The Chancellor may look to raise the £50,000 High Income Child Benefit earnings threshold. This of course would be popular with voters with young families.

Introduced in 2013, the current threshold system is unpopular, as it means one person earning £60,000 doesn’t receive any child benefit, but a household with two people each earning £50,000 would each get the full payment.

Currently, earnings between £50,000 and £60,000 require the recipient to repay a proportional amount of the child benefits back to HMRC until all the benefit has been repaid via self-assessment, once earnings reach £60,000 per annum.

 

Inheritance Tax

Rumours of Inheritance Tax being abolished was prevalent in the build up to the Autumn statement last November. Under current rules, tax is charged at 40% on assets or money you leave to heirs over the tax-free threshold of £325,000. But that accounts for less than 4% of UK deaths.

Whilst the Chancellor, supported by the Prime Minister, may well not wish to abolish the tax, some changes may be possible. The Nil Rate Band threshold of £325,000 has been frozen since April 2009. Inflation increases since then would see the allowance stand at nearly £500,000. Therefore, an increase in the allowance could well help appease the small percentage of the nation impacted by inheritance tax. 

 

For further guidance

 

For further guidance on any of the tax measures discussed in this article, please contact your usual MHA advisor, or contact us on enquiries@mhacaves.co.uk

 

Read the latest Spring Budget commentary from MHA – visit our dedicated hub where we will be providing resources, advice and practical guidance on what any new tax measures could mean for you and your business, to help you prepare for and manage their impact.