At Ovation we pride ourselves in doing the hard work for our clients and have been digging into the Spring Budget to see what changes might affect them personally.

Unsurprisingly, we saw some interesting changes in the Spring Budget – sitting governments often use these budget announcements as a last-minute attempt to win some votes in the run up to general elections. We will be keeping an eye on the Autumn Budget for the same reason.

The spring budget headlines;

The British ISA

The most sensational update is around the “British ISA” or GBISA.

So, what is it?

It is an extra £5,000 allowance that investors can use that will benefit from tax free income and growth.

But there is a catch!

This money needs to be invested into UK equities.

Now, the problem with this is that the finer details need to still be ironed out. For example… What classes as a UK equity? Many foreign companies are listed on the UK Stock Exchange and/or have large interests in overseas businesses. And many listed UK-based investment trusts hold overseas stocks.

The government needs to agree on the rules for this, and we are unlikely to know more until 6th June 2024.

A £5,000 increase to the general ISA allowance would have been a little simpler, but any increase is welcome.

We will share when we know more!

Take home pay increases for those of “working age”

The rate of National Insurance (NI) is reducing on workers earnings in the £12,570 and £50,270 band. From January this year, employees saw NI in this band fall from 12% to 10%, but from April, this is now due to fall a further 2%, to 8%.

For the self-employed, the rate was due to fall from 9% to 8% in April, but the self-employed too will benefit from this extra 2% cut, so from April will see their Class 4 NI rate be 6%.

Any extra money in our pockets is likely to be helpful when so many households are struggling with the increased cost of living, but this 2% boost is a long way off outweighing the fact that the tax thresholds have been frozen since April 2021 and are due to be until 2028.

These frozen rates, mean that as our earnings increase with inflation, the actual % of our pay that is taken in tax increases a little each year. This is often called “Fiscal Drag”.

New NS&I Savings Bonds!

A new product is being launched by NS&I that will offer a guaranteed interest rate fixed for 3 years.

The interest rate is currently unknown, so this could be relatively unexciting announcement if the rates are not competitive against retail banks.

The biggest appeal of NS&I is that because you’re effectively lending to the government, the money is secure and 100% backed by HM Treasury. So, you’re not limited to the usual £85,000 compensation limit.

Capital Gains on Property

Firstly, the Capital Gains Tax (CGT) exemption rules for your main residence still apply. This only effects people with 2nd homes or rental properties.

CGT is charged in 2 bands. Where gains added to your income fall below the Higher Rate Threshold, they’re taxed at 10% and above this 20%.

Gains on property, however, come with an additional 8% tax! Taxed at 18%/28%.

From April the higher rate will fall to 24%. With the CGT allowance falling to £3,000, having been as high as £12,300 in 2020/21, a small cut in the higher rate of CGT will be welcome to property owners looking to sell up.

Furnished Holiday Let regime being abolished!

Landlords who ran short-term furnished holiday properties, and met certain criteria, used to benefit from rules that essentially treated these as businesses.

From April 2025, this regime will be abolished, and these properties will be taxed in the same way as buy to let properties.

This means that owners will no longer be able to:

• Deduct the full cost of their mortgage interest against their rental income;
• Make pension contributions based on their profits;
• Use Business Asset Disposal Relief and potentially pay 10% CGT when selling properties;
• Pass on gains with a gift;
• Roll gains over into a qualifying replacement property/asset;
• Offset the cost of furniture, fixtures, and fittings against profits.

Currently 127,000 properties are registered under this regime. This is likely to encourage some owners to sell up or switch to long-term lets.

As the changes have quite significant financial implications and time is very limited, if this change will affect you or anyone you know, it would be a good idea to get in touch with Ovation ASAP!

Some relief for parents

The threshold above which parents start to receive a “High Income Child Benefit Charge”, which effectively cancels out any Child Benefit payment, previously started where a member of the household’s income was above £50,000 and was totally lost from £60,000.

The threshold has now been raised to £60,000 and the rate at which it will be fully cancelled out at has been halved, so will only be fully lost where someone in the household is earning above £80,000.

Had the threshold increased in line with inflation, this is roughly where it should be right now, so it is pleasing to see this change come in to support parents who are already struggling with both a shortage of childcare places and costs that are increasing faster than inflation!

It’s worth mentioning, that this is a hugely unpopular charge, as it is seen as an unfair system for both single parents and single income households. There is shortly due to be a consultation on basing the charge on household and not individual incomes, with effect from April 2026.

As a quick reminder, making payments into pensions reduces your “adjusted income” for these purposes, so if you have spare income or some unallocated savings, it could be a useful opportunity to reclaim some child benefit whilst boosting your retirement fund.

Contacting the Ovation Team

The Ovation team are here to understand the intricacies and nuances that feed into our clients financial plans. We’ve got you covered and will guide you through any necessary adjustments. You can sit back and relax knowing your financial wellbeing is our top priority.

If you would like to discuss these points in further details or have questions about something in the spring budget not covered on this list, please do contact the Ovation team.

Give us a call on 0117 942 4333 or email us at enquiries@ovationfinance.co.uk

The information contained within this article is not individual financial advice and for information only. It is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing.

Levels, bases and reliefs from taxation may be subject to change. The value of your investments can go down as well as up, so you could get back less than you invested.

Past performance is not a reliable indicator of future performance. The Financial Conduct Authority does not regulate tax and estate planning.