Budget summary: this year’s changes explained

Published  08 March 2024
   5 min read

On Wednesday 6 March 2024, the government announced the 2024 Spring Budget.

In our latest video, Consumer Finance Specialist, Sarah Pennells, explains how it could impact you.

Spring Budget 2024

There was a range of measures announced in the Budget, some of which were more headline-grabbing than others.

The big tax change was the reduction in the main National Insurance rate, which will kick in from April, and the Chancellor had already announced a change to the national insurance rates in the Autumn Statement in November. And the effect of those two cuts combined means according to government figures, someone who’s employed earning £35,000 a year will be £900 better off this year. Whereas, someone who works for themselves and who earns for example £28,000 a year will be £650 better off this year.

Of course, people who are State Pension age or older don’t pay National Insurance if they’re working so they won’t benefit from that cut. There is one consequence that could affect people who pay into a workplace pension through something that’s called salary sacrifice, and it’s worth explaining. The way that salary exchange works is that you exchange or give up part of your salary in return for your employer paying that money into your pension, and it saves you tax and National Insurance. Which is why people do it. But, of course if the National Insurance rate is cut in April, which is what’s going to happen it could mean for some people that less money goes into their workplace pension.

There were other changes announced as well. So for people who work for themselves, the VAT threshold will rise from April from the current level of £85,000 a year to £90,000 a year.

One of the other big changes that the Chancellor announced will affect people who claim child benefit and where one of more of the couple is a higher earner. So under the current rules, if you live with somebody and either you or they claim child benefit and one of you earns £50,000 a year or more, then that person has to pay a tax charge on the child benefit that they receive. Now that tax charge is graduated, so the more you earn, the more tax you pay and once you or your partner earns £60,000 a year or more then the tax charge is equal to the amount of the child benefit that you receive. Now what the Chancellor announced is that from April, that £50,000 threshold will rise too and that higher £60,000 threshold will rise to £80,000. So that will mean that there will be hundreds of thousands of families who will pay less tax as a result.

He also said he wants to address the unfairness of the system. That means currently if one person claims child benefit and lives on their own and they £50,000 a year or more, they have to pay that tax charge. Whereas a couple live together and one of them claims child benefit and for example, they earn £49,999 neither of them would have to pay that tax charge. Now, sorting out that unfairness is complicated. So it’s not expected that will be introduced until April 2026.

A couple of other changes to highlight, there will be a new UK ISA , which will have an allowance of £5,000 a year and that’s for people who invest in UK based assets. That £5,000 allowance is on top of the existing ISA allowances.

There will be a three year bond, paying a fixed rate of interest offered by national savings and investments and available from April.

And then finally, the Chancellor said that the household support fund would continue for another six months. Now this fund is administered by local authorities. It was due to run out in April, but will be extended until October, and it’s designed to people to help people who are on a very low income and who are struggling to pay for the basics such as energy or food or essentials.

The Chancellor also announced a change to something called the debt relief order. Now this is available to people in England and Wales who are on low income, maybe with quite modest assets and who have debts that they can’t pay back. Currently there’s a £90 fee for you to apply for a debt relief order. From April that fee will be abolished.