Yesterday’s Budget was more than likely the final throw of the economic dice by the current government who are wrestling with the conundrum of total tax revenue being at an 80-year high versus public services are being strained and underfunded.
The highlights of the Budget and our verdict from a personal finance view are:
National Insurance is being reduced from 10% to 8% from 6 April on employed earnings between £12,570 and £50,200, saving the average employee £450 p.a. Similarly, National Insurance for self-employed will reduce from 8% to 6%, also from April.
Chatfield verdict: good news… but… overall OBR figures show that average incomes will be no higher at the end of this Parliament than they were at the beginning in 2019.
A British ISA allowance of £5,000 on top of the existing £20,000 allowance will be introduced to permit investment into “promising UK businesses”. A consultation on this will run until 6 June, so this extra allowance will not be introduced until 6 April 2025.
Chatfield verdict: moderately good news. The ISA landscape becomes even less simple and the devil is in the detail of what you can invest in. How will HMRC define a “promising UK business”?
The Child Benefit threshold is increasing from 6 April; currently Child Benefit is phased out if one person in a household earns over £50,000 and removed entirely at £60,000. These thresholds are being increased to £60,000 to £80,000.
Chatfield verdict: good news, a well overdue change, and all credit to Martin Lewis at Moneysaving Expert for lobbying so hard for this. The current thresholds haven’t changed since 2013 but the new thresholds have still not caught up with inflation. On another mildly positive note, a consultation will be launched “in due course” on whether to base Child Benefit on household income, not individual income.
The higher rate of Capital Gains Tax on second homes and buy-to-lets will reduce with immediate effect from 28% to 24%. The lower rate of CGT for such asset sales will stay at 18%.
Chatfield verdict: any tax reduction will be welcomed by those it affects and if this enables more local people to buy a property in tourist areas then that is good news. But beware the law of unintended consequences – if there are fewer properties for short-term rent then there could well be fewer tourists…
Furnished holiday lettings (FHL) tax regime for landlords who rent out short-term furnished holiday properties, including second homes. The regime will be abolished in April 2025.
Chatfield verdict: this sounds like a good idea but, as above, beware the law of unintended consequences. This will cost the average FHL £2-£3,000 a year in extra tax, possibly reducing the number of properties available as holiday lets which could impact local tourism.
Non-domicile tax status scrapped from 6 April 2025.
Chatfield verdict: Labour had announced plans to scrap this several months ago. Jeremy Hunt criticized it at the time but has now brought in his own version. Change of some sort was coming here regardless.
