The Spring Budget 2024 contained some important personal tax changes, albeit few of them came as a great surprise due to advanced briefings.
As with the Autumn Statement, the key takeaway was that despite tax cuts in certain areas, many people will end up paying more tax overall next year.
The Institute for Fiscal Studies estimates that by 2028, the UK’s tax burden will hit its highest levels since the second world war.
The main reason for this is the ongoing process of fiscal drag, whereby the current freeze on income tax thresholds and allowances pushes people into higher tax brackets.
As a result, the number of people paying tax at 40 per cent has increased by 40 per cent in the past three years.
For employed and self-employed workers
Following a similar move in the Autumn Statement, the headline tax cut was a further 2 per cent reduction in the main rate of national insurance.
This latest cut represents a saving of £448.60 next year for a worker earning £35,000. However, the benefit of this tax cut is capped at £754 per year, which is the amount that will be saved by earners on more than £50,270 a year.
Targeting national insurance was a more affordable option for the chancellor than cutting income tax because it is only paid by workers.
It is reported that he had limited headroom for major tax cuts and could be holding back for further pre-election giveaways.
The rate of employer’s national insurance remains unchanged at 13.8 per cent, which is bad news for employers struggling with wage inflation.
Meanwhile for investors, the chancellor announced a new British Isa allowance of £5,000 per year for investment in Britain – pending a consultation on its implementation – in an attempt to boost the UK’s stock markets.
For property owners
On the property taxes front, some owners will benefit from a reduction in the higher capital gains tax rate on residential property, which is set to fall from 28 per cent to 24 per cent.
However, the lower rate of CGT on residential property remains unchanged at 18 per cent.
Landlords who qualify for certain tax breaks on their furnished holiday lets will see these end on April 6 2025.
Furnished holiday lets are properties rented out on a short-term basis. The chancellor noted the need for longer-term rentals in certain areas, particularly for those living in popular UK holiday destinations.
For property purchasers, another tax break – multiple dwellings relief – was abolished in the Budget, impacting transactions that complete from June 1 2024 (except where contracts were exchanged on or before March 6 2024).
The relief was aimed at purchases of more than one dwelling in a single transaction, but while it did provide a stamp duty land tax saving for some, it also led to several more spurious claims.
Awareness of the relief was not that high, and the chancellor stated that it had not brought the intended benefits to the rental market, making it a relatively easy revenue-raising adjustment for the government.
