City thinking, local knowledge

Spring Budget 2024 Overview

By Questa Chartered

The Chancellor’s UK Spring Budget 2024 is pitched to boost the UK economy. It’s the Government’s last throw of the dice before the predicted General Election and is packed with plans and investments designed to spark growth, drive innovation, and lend a helping hand to various parts of our economy.

Let’s pick out a few key changes.

  1. National Insurance Changes
  2. Investment and Savings changes
  3. Cost of Living Support Measures

1. National Insurance Changes

The Spring Budget 2024 includes significant changes to National Insurance contributions (NICs) to reduce the tax burden on workers and support the self-employed. Here’s how these measures break down:

  • Reduction for Employees: Starting from 6 April 2024, the main rate of Class 1 employee NICs will be cut from 10% to 8%. This reduction is part of a broader effort to lower the tax burden on working individuals, enhancing their take-home pay and financial well-being.
  • Support for the Self-Employed: The main rate of Class 4 NICs for the self-employed will be reduced from 9% to 6%, also effective from 6 April 2024. Additionally, the Government has abolished the requirement to pay Class 2 NICs from the same date. These measures are designed to acknowledge the contribution of self-employed individuals to the economy and to ensure that work pays off for everyone. This represents a significant saving for the average self-employed person, with an average saving of £650 a year for those earning around £28,000.
  • Historic Reductions: These changes are described as the largest ever cut to both employee and self-employed National Insurance contributions. Workers will expect to see a one-third reduction in their main rate of NICs compared to April 2023, highlighting the government’s commitment to reducing the tax burden on working people.
  • Long-term Implications: The reduction in NICs is not only aimed at providing immediate financial relief but also at encouraging greater participation in the workforce. The Government anticipates that the cuts will contribute to an increase in the total hours worked, thereby supporting economic growth and productivity.
  • Consultation on Class 2 NICs: The Government has also announced plans to consult later in the year on the full abolition of Class 2 National Insurance. This follows the move to no longer require self-employed individuals to pay Class 2 NICs from April 2024, with voluntary payments continuing to be an option for those wishing to maintain their entitlement to contributory benefits.

These measures represent a significant shift in the taxation of labour in the UK, with the aim of making the tax system fairer and more conducive to economic growth by reducing the financial burden on both employees and the self-employed.

2. Investment and Savings Changes

The Spring Budget 2024 introduced several measures related to investment and savings allowances to bolster economic growth and encourage savings among UK residents:

  • Introduction of a New UK ISA and British Savings Bonds: The budget announces the launch of a new UK ISA and British Savings Bonds. The UK ISA will provide a £5,000 allowance in addition to the existing ISA allowance, offering a tax-free product for investing in UK-focused assets. The British Savings Bonds, to be launched in April 2024 through National Savings and Investments (NS&I), will offer a guaranteed interest rate fixed for three years, thereby increasing the savings opportunities available to consumers.
  • Commitment to Diverse Investment Opportunities through ISAs: The government reaffirms its commitment to ensuring that individuals have the opportunity to invest in a wide range of investment types through their ISAs. This includes enabling investments in certain fractional share contracts, with the government working swiftly to bring forward necessary legislation following detailed engagement with the industry and the Financial Conduct Authority (FCA).
  • Progress on Exiting NatWest Shareholding: The Government continues to make progress on its commitment to fully exit the NatWest shareholding by 2025-26, utilising a range of disposal methods. This effort has generated significant proceeds to date and aims to return NatWest to private ownership while supporting the development of a savings and investment culture in the UK.

These measures signify the Government’s efforts to promote savings and investment culture across the UK, offering new opportunities for individuals to invest in the economy and supporting broader economic growth objectives.

3. Cost of Living Changes

The Spring Budget 2024 outlines several measures designed to support UK households amidst the cost of living crisis, with a focus on providing relief to vulnerable groups and bolstering the economy. Here are the key cost of living support measures announced:

  • Household Support Fund Extension: An additional £500 million (including Barnett impact) is allocated to extend the Household Support Fund in England from April to September 2024. This fund is targeted at assisting vulnerable households with essential expenses, such as food and utilities, as inflation continues to decline.
  • Fuel Duty Freeze: The Government has frozen fuel duty rates for the fiscal year 2024-25. This includes extending the temporary 5p cut in fuel duty rates until March 2025 and cancelling the planned inflation increase for 2024-25. This freeze represents a tax cut worth £3.1 billion over 2024-25 and is aimed at supporting motorists and the wider economy.
  • Alcohol Duty Freeze: To support the hospitality sector and provide cost of living relief to consumers, alcohol duty rates will be frozen from 1 August 2024 until 1 February 2025. This measure extends a six-month freeze announced in the Autumn Statement 2023.
  • Prepayment Meter (PPM) Levelisation: Following Ofgem’s announcement, the government is removing the PPM standing charge premium on a permanent basis, saving PPM customers an average of £50 a year. This move addresses the higher up-front charges for energy faced by many vulnerable consumers using prepayment meters.
  • Debt Relief Orders (DROs) Changes: The Government is making it easier to access Debt Relief Orders by removing the £90 administration fee from April 2024. Additionally, the eligibility criteria for entering DROs will be amended, including raising the maximum debt value threshold and the maximum value of motor vehicles.
  • Universal Credit Budgeting Advance Repayment Period Extension: The Government will increase the maximum repayment period for new budgeting advance loans from 12 months to 24 months starting from December 2024. This change is designed to help those on Universal Credit manage their debts more effectively.

Collectively, these measures aim to provide targeted relief to those most affected by the cost of living pressures, supporting households with their essential expenses and contributing to economic stability.

Other Changes to Look Out for

  • Support for SMEs: Acknowledging the crucial role of SMEs, the Government announced measures to help SME leaders acquire vital skills, seize growth opportunities, and access finance. The Recovery Loan Scheme has been extended and renamed the “Growth Guarantee Scheme”.
  • Tax Reliefs and Reforms: The budget outlines reforms to simplify and improve R&D tax reliefs and establishes an expert advisory panel for R&D relief administration. It also introduces measures to support commercialisation across the UK’s university sector and boost innovation.
  • Employment and Productivity: A comprehensive plan including a £7 billion package aims to increase employment, with specific support for the long-term sick, disabled, and unemployed. The plan includes making full expensing permanent, reforming planning systems, and investing in strategic manufacturing sectors.
  • Public Sector and Infrastructure Improvements: The budget outlines investments in public sector productivity, including digital transformation in the NHS and AI adoption across public services. It also addresses infrastructure improvements, especially in transport, and commits to increasing public sector efficiency.
  • Personal Finance Support: There are announcements aimed at enhancing personal finance through measures like introducing a new savings product with a guaranteed interest rate and creating an additional Individual Savings Account (ISA) allowance.
  • Science and Innovation: A commitment to science and innovation is underscored with record levels of investment in research and development (R&D), including a £750 million package. This includes funding for Faraday Discovery Fellowships and Green Future Fellowships, as well as new announcements to bolster the UK’s strategic advantage in public sector research, satellite communications, and quantum computing.

This overview highlights the Government’s focus on innovation, SME support, employment, productivity, public sector improvements, and personal finance enhancements as key areas for driving long-term economic growth and stability.

Will The Government’s Last Throw of the Dice be Enough to Convince Voters?

The cut in National Insurance contributions focuses on much-needed relief to workers and the self-employed alike, potentially sparking more entrepreneurial ventures.

At the same time, the enhancement of investment and savings allowances is designed to invigorate personal finance management, encouraging more people to save and invest with greater confidence.

Furthermore, it is hoped the array of measures aimed at supporting those grappling with the cost of living paints a picture of a Government attuned to the immediate challenges of its citizens.

Together, these initiatives underscore a budget that’s not just about numbers but about real-life impacts, aiming to foster a more financially secure and, dare we say, prosperous society.

You can monitor the latest response to the budget on our curated news page

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