The spring budget comes and goes with no major changes to the world of financial planning. There are however some announcements and changes that will affect what we do, and the main ones here include:

1. An Additional ISA Allowance of £5,000 when investing in UK equities.
2. Higher Income Child Benefit Tax Charge threshold increased to £60,000 (with upper taper moved to £80,000). Plans to move assessment to household income by April 2026.
3. Reduction of CGT rates that apply to property. The higher rate (only) will be reduced from 28% to 24%.
4. Abolishment of the current non-domicile tax system with a replacement regime in place.
5. Further reduction of NI from the rate of 10% on class 1 to 8%. Class 4 will see a reduction from 8% down to 6%.

Additional ISA Allowance

The introduction of the extra ISA allowance, £5,000, is not happening immediately (post 6th April) and requires further announcements to be made. The further announcement will need to establish the exact rules around what qualifies to be used. What has already been confirmed is the amount, the overall intention behind the measure and the fact that the new allowance will sit separately from the other ISA allowances.

It’s not clear just yet (and it will be for providers to tell us in the coming weeks) as to how this extra allowance will be offered, whether new separate ISAs are needed or whether this extra allowance can be accessed through an existing ISA.

Child Benefit

The big announcement here was the plans to move the assessment of the Higher Income Child Benefit Tax Charge from a single-income assessment to a household income assessment by April 2026. This would mark a significant change in the way UK tax is applied with the bulk of the system set up on an individual basis. Presumably with HMRC given the ability to collect and measure information on a household basis, the door could be opened for further forms of tax to be considered on a household, rather than individual, basis.

In the interim, the amount in which it applies increases (from 6th April 2024) to £60,000 from £50,000. The taper will also be halved, so instead of the full benefit being clawed back in tax at £60,000, it will apply at £80,000.

CGT on property

A surprising and small change will be the rate at which higher rate tax is applied on property capital gains. A reduced rate of 24% closes the gap on the basic rate of 18%.

Non-dom rules

A major change to the rules on non-domiciled persons with a specific tax regime was introduced for the first four years of becoming a UK resident, followed by a tax regime largely similar to a UK-domiciled individual after that. The new rules allow for the newly resident non-dom.

National Insurance

As expected, a further reduction in national insurance applies with the rate for class 1 reducing from 10% to 8%, and the rates for class 4 dropping from 8% to 6%. Both will apply from 6th April 2024. There is not too much to add here, we saw a reduction apply from January this year and it was widely expected in recent days for a further reduction to follow.

What we already knew

We already knew some changes, the main one being the abolishment of the Lifetime Allowance and the introduction of replacement allowances.

So, from 6th April 2024, the Lifetime Allowance officially disappears from legislation. It does not, unfortunately, disappear from our day-to-day lives and it will still play a part in planning in tandem with the two new allowances:

• The Lump Sum Allowance (LSA)
• The Lump Sum and Death Benefit Allowance (LSDBA)

These two allowances replace a lot of what is lost by abolishing the lifetime allowance, that is putting a lifetime limit on what PCLS you can take and putting a limit on the tax-free lump sum death benefits available on deaths before age 75.

Tax allowances

No further changes here. The Capital Gains Tax (CGT) exemption will drop to £3,000 (from £6,000) and the Dividend allowance will drop to £500 (from £1,000).  The other tax allowances all remain as they are this tax year.

Grant Callaghan, Technical Specialist

–The Verve Group