There were no great surprises in the Spring Budget announced on Wednesday 6th March 2024. We’ll consider the impact for each of our clients at their planning meetings but for those who would like a general update, we’ve set out some of the key takeaways below:

National Insurance

• The big saving this time was a further reduction to the main rate of Class 1 National Insurance, with a cut of 2p from 10% to 8%. This new reduction will come into effect from 6^th April 2024 and is in addition to the previous 2p cut announced in the 2023 Autumn Statement that came into effect from 6^th January 2024.

• Class 4 National Insurance is also being cut by 3p from 9% to 6% from 6^th April 2024 replacing the previous cut to 8% announced in the 2023 Autumn Statement.

Capital Gains Tax

• The higher rate for capital gains tax on residential properties will be reduced from 28% to 24%. As previously planned, the annual exempt amount for capital gains tax will also reduce from £6,000 to £3,000 from 6^th April this year too.

High Income Child Benefit Tax Charge

• The child benefit income threshold at which the benefit is tapered will rise from £50,000 to £60,000. The benefit will also now not be fully tapered away until an individual earns £80,000.

Furnished Holiday Lettings

• From 6^th April 2025, the Furnished Holiday Let (FHL) tax regime will be abolished.

UK ISA

• A new ‘UK ISA’ is to be launched, with an additional allowance of £5,000 pa of tax free investment into UK assets in an effort to drive growth in British businesses. The government is to consult on the creation of the UK ISA and further details are expected in due course.

Business and Investment

• The threshold at which small businesses must register to pay VAT raised from £85,000 to £90,000 from 6^th April 2024.

• The government loan scheme introduced during Covid for small businesses has been extended until March 2026.
  
• Tax reliefs for touring and orchestral productions have been made permanent.

Other Key Items

• Stamp duty tax break when purchasing multiple properties in England or Northern Ireland will end in June.
• The government has announced that National Savings & Investments (NS&I) will launch a product which will offer consumers a guaranteed interest rate, fixed for three years. This product will increase savings opportunities available to consumers in the UK and will be brought on sale in early April 2024.

• The previous 5p reduction to fuel duty will be extended and fuel duty will be frozen for the 14^th year running.

• Alcohol duty remains frozen until February 2025.

• New tax on vaping products will be introduced from October 2026 and tobacco duty is will go up £2.00 per 100 cigarettes at the same time.

• Windfall tax on the profits of energy firms will now apply until 2029, extended from March 2028.

• Tax paid on flights known as air passenger duty will increase for business class tickets.

• For the NHS, an upgrade in full of the computer systems is being planned, costing £3.4bn.

• The ‘non-dom’ tax regime will be scrapped. This applied to people who are not UK domiciled and hence don’t pay tax on worldwide income, only the income received in the UK, for the first 7 years of being resident in the UK. From April 2025, new arrivals to the UK (provided they have been non-tax resident for the last 10 years) will not have to pay UK tax for the first 4 years of residency. After this point, the tax rules applicable will be the same as to other UK residents.
  • There will be a transitional arrangement for those currently benefitting from the non-dom status:
    • A temporary 50% tax reduction in foreign income subject to tax in the 2025-26 tax year.
    • For the disposal of foreign assets after 6 April 2025, non-doms can choose to be taxed only on capital gains since that date.
    • Under a ‘temporary repatriation facility’ in the tax years 2025-2026 and 2026-2027, non-doms will be able to remit foreign income and gains at a rate of 12%.
    • Income and gains that have arisen before 6 April 2025 will not be taxed unless they are paid to UK residents who have been here for more than four years.

The Budget also confirmed that UK inflation is forecast to fall below 2% later this year (the Bank of England’s target is 2% pa). Growth in the UK economy is predicted to be 0.8% during 2024 and 1.9% during 2025. As with all forecasts, these are estimates and predications can go awry, but they can be useful insight when helping us assess the choices we make about our finances.

The government has announced that it will put legislation in place to allow parents and carers to apply for National Insurance Credits where they have not claimed Child Benefit, to ensure that people do not miss out on their State Pension entitlement.

In most cases, you can get a full State Pension if you have 35 qualifying years of National Insurance contributions, and you need a minimum of 10 qualifying years to receive any State Pension entitlement. One way to earn a credit other than through employment or making voluntary contributions is by claiming Child Benefit. This means a parent or carer can be credited with National Insurance Contributions until their youngest child is 12, even if they are not earning.

Child Benefit payments are received tax-free as long as neither parent earns more than £50,000 a year. However, if earnings are higher than this, some or all of the Child Benefit will need to be repaid in an extra form of Income Tax known as the ‘High Income Child Benefit Charge’.

In April last year, the government recognised concerns that some eligible parents who had not claimed Child Benefit, often to avoid the High Income Child Benefit Charge, could miss out on their future entitlement to a full State Pension. The government said the issue would be addressed to ensure that those affected are not disadvantaged due to not claiming Child Benefit.

HMRC said legislation will be brought forward and will allow individuals to claim this credit from 2026, and eligibility will be closely based on the criteria for receiving Child Benefit. The credit will add qualifying years of National Insurance where eligible, which will support future State Pension eligibility. Transitional arrangements will ensure those affected since 2013 are still able to claim.

Going forward, applications will be available for 6 years following the relevant tax year and the government plans to bring forward secondary legislation as soon as possible.

You can read more about checking your State Pension entitlement here.

The end of 2023 saw positive news in markets, despite experts predicting doom and gloom for the economy at the start of the year. Inflation came in lower than expected and markets speculated that major central banks could cut interest rates through 2024. The Federal Reserve Bank set the table for as many as 3 interest rate cuts through 2024, whilst the Bank of England awaits further evidence that inflation will fall to the 2% target, and stay there, before lowering rates.

With many commentators suggesting that markets may be too optimistic about rate cuts this year, it is clear that the path to falling interest rates remains uncertain; both this and inflation will continue to dominate markets in the short term. So, what does this tell us about what we can expect in the coming months? The truth is nobody knows!

It is not possible to predict the short-term direction of markets and we can never know when they might fall suddenly, whether rallies will continue, and how long they will go on for, despite what headlines might say. Uncertainty in markets causes volatility and, as you might expect, the main factors that contribute to uncertainty are unknown events that cannot be predicted.

So, what does matter? We know it is important as Financial Planners to ensure that our clients are happy with the amount of investment risk they are taking within their invested portfolios. When we talk about risk, we generally mean the level of volatility within the portfolio, rather than the risk of losing all of your money. It’s really important to make sure this is ‘right’ for you as this, as well as maintaining a comfortable cash reserve, can make the difference between being able to accept market movements or not.

No matter what the forecasts are for the months ahead, our philosophy remains the same at Eldon – remaining invested in a well-diversified portfolio, appropriate for your circumstances, risk tolerance, and long-term goals, is what will ultimately lead to a much better outcome from an investment perspective, rather than trying to predict the short term and the unknown.

The deadline of 31st January 2024 for submitting Self Assessment tax returns for the 2022/23 tax year is looming. If you need to submit a tax return, it is important to do so by the deadline to avoid paying late filing penalties.

You can check whether or not you need to complete a tax return for 2022/23 by using the government tool.

If you submit your return later than the deadline, you will typically face a £100 penalty if the tax return is up to 3 months late. Should the return be submitted over 3 months late, you may be faced with a larger penalty.

Any payment for underpaid tax must also be received by HMRC by 31st January 2024. You will be charged interest by HMRC on any late tax payments:

• 30+ days late – you’ll need to pay a 5% penalty of the tax owed
• 6+ months late – you’ll need to pay a further 5% penalty of the tax owed
• 12+ months late – you’ll need to pay an additional 5% penalty of the tax owed

You can complete your Self Assessment tax return online here.

You can pay any outstanding Self Assessment tax bill online here.

For a fee, professional accountants can help you complete your Self Assessment, or complete it on your behalf, however you will need to provide them with the relevant figures. Please get in touch if you would like a recommendation for accountants we have previously worked with.