Inflation predicted to reduce to 2% in Q2 2024
Chancellor Jeremy Hunt opened the Spring 2024 budget highlighting that inflation has more than halved from its recent peak and is currently sitting at 4%. He then went on to announce that the Office of Budget Responsibility (OBR) forecasts that inflation will drop to 2% in the next two months. This is positive news for anyone taking out or renewing a mortgage this year with experts predicting that the Bank of England base rate will be adjusted favourably if inflation comes down.
Introduction of a new UK ISA and British Savings Bonds
Investing in the UK featured again in the chancellor’s “budget for long-term growth”, having also featured in last year's Autumn Statement. Two initiatives have been introduced to encourage greater participation from individuals and pension funds in investing in UK stocks.
The first initiative involves the introduction of a UK ISA, which will allow individuals an additional £5,000 annual investment specifically in UK businesses. This new ISA enjoys all the tax benefits associated with other ISAs and represents a £5,000 additional investment on top of the existing ISA allowance. This measure aims to ensure that UK savers can capitalise on the potential growth of the most promising UK businesses and help unlock more private capital for the UK’s growth industries, as outlined by Hunt. The UK ISA is open to consultation and further information, including a date of introduction will be announced.
In addition to the ISA, British Savings Bonds are also being introduced. These will be launched in April 2024 and will be delivered through National Savings and Investments. The Bonds will offer a guaranteed interest rate, fixed for three years, and are designed to increase the savings opportunities available to consumers.
Pensions in the Budget 2024
The second initiative to support greater investment in UK stocks involves encouraging pension funds to invest more of their cash into the UK economy. The Chancellor announced that local authorities and defined contribution (DC) pension funds will have to disclose how much they have invested in UK stocks.
Mr Hunt announced that the government will continue to explore the pension pot for life concept, which will look to allow savers to take pension pots with them when they move jobs.
Changes to child benefit thresholds
The Chancellor announced that he wanted to make the child benefit system fairer and is looking to move from a system based on individual income to a system based on household income by April 2026. The Government will consult on this change but in the meantime, the thresholds for the High Income Child Benefit Charge (HICBC) will increase from £50,000 to £60,000. The taper range is also increasing to £60,000 to £80,000 from 6 April 2024. With the rate of charge halved from 1% of child benefit for every £100 earned above the threshold to 1% for every £200, meaning Child Benefit is fully withdrawn when income reaches £80,000.
This will impact high earners who may have chosen to place additional funds into a pension to reduce their taxable income and to avoid losing child benefit.
For further information on the changes announced in the Spring 2024 budget including the cut in National Insurance Contributions, the changes to taxation on Furnished Holiday Lettings, and higher rate property Capital Gains Tax, read the TaxAssist Accountancy summary of the 2024 Budget.