Budget 2024 - Your Country Needs You
Today's spring Budget 2024 was a worker's Budget. There were many changes encouraging us back into work. Not just the reductions in National Insurance but also aiming to deal with certain perceived unfairness to help us all feel better about bothering to turn up:
1. Employee & Self Employed NI Reductions - 6 April 2024. VAT Threshold Increase - 1 April 2024
In time to see several payslip improvements before the election, but not necessarily the self employed unless they prepare an early tax return, this should be encouraging. It could be possibly one reason for someone who hasn't yet gone back to work since Covid, to think again....
The maximum saving for an employee is 4% of £37,700 = £1,508, and on average pay of about £35k it's £900, which does start to get more interesting.
The total self employed Class 4 reduction of 3% is very welcome. Along with the abolition of Class 2 this saves the average self employed person £650. The Press Release refers to an average sole trader profit of £28k which sounds about right. After deducting the Class 4 tax free threshold of £12,570, 3% is worth £463 and add on the Class 2 saving gets to you to about £650.
Despite the many complaints about thresholds of £50k and £100k, there are lots of people in work and self employment earning less than this who are being targetted.
Family companies will need to revisit the dividend-salary debate and calculations, lower NI clearly tipping in favour of more salary than you may have taken before.
A small mention for the VAT threshold increase from £85k to £90k which will prevent some businesses from working less to avoid getting into the VAT system. However, it's only a 5.8% increase which doesn't offset inflation. Businesses who don't want to be VAT registered, are likely to suffer from a lack of real growth.
2. Higher Income Child Benefit Charge Improvements - 6 April 2024
Again, this is in time to be appreciated before an election. The starting threshold increase from £50k to £60k and the reduction in child benefit from that now to £80k rather than £60k means that child benefit is taken away from you more gradually and will feel a lot fairer.
After this, from April 2026 - following consultation - it is planned that child benefit will be based on household income, which many commentators wanted from the beginning when it was first brought in. Perhaps IT systems can now cope with this? Or it's become obvious that it discourages either parent near the threshold to work any harder.
3. Furnished Holiday Lettings (FHL) - Abolished - 6 April 2025
Most employees won't be affected by this apart from potentially benefitting from more properties being sold or moved into the normal rental property pool.
The tax benefits for FHLs include full tax relief for loans against the property so they may become unaffordable for some landlords to continue. If so, there's a small encouragement one year earlier to sell up.....
4. Residential Properties Capital Gains Tax - Small Reduction - 28% to 24% - Exchanges From 6 April 2024
The normal capital gains tax rate for higher rate taxpayers on other assets, apart from residential property, is 20%, so this 24% is a half-way house. If FHL landlords need to sell they at least save a bit of capital gains tax.
On the other hand, it might encourage some professional landlords already providing 'normal' AST rentals, to stick around to provide rental properties for hard-working people.
Remember the tax free Annual Exemption is halving from April from £6k to £3k, so the net saving is reduced slightly.
Interestingly, the 24% rate makes owning rental properties in a limited company paying 26.5%/25% corporation tax look less favourable than before.
5. Creative Industries
Playing to one of the UK's strengths and therefore likely adding to growth, there was good news for films, orchestras, theatres, museum and galleries. We can at least be entertained after our hard work.
6. Other Simplifications To Make You Feel Good
Workers feel aggrieved that others seem to get a better deal, so these may help:
Abolition of Stamp Duty Mulitple Dwellings Relief - 1 June 2024 - No longer rewarding owners of multiple properties and saves court time arguing about what multiple properties actually mean!
Abolition of Non-Dom status - April 2025 - This will go, but there'll be something available for a limited period, looking a lot simpler, short term and fairer.
Public Sector Productivity Improvements - Lots going on here, which should make our experiences feel more streamlined and efficient - eventually! No-one minds paying tax, if it's spent wisely.
It might also have been an election Budget - we shall we see....