MoneyMatters: HARRISON SMITH Money Matters in March

Hartlepool-born Harrison Smith is a financial adviser based in his hometown’s Greenbank business centre associated with Emerald Associates. Harrison offers an insight into money matters in an exclusive monthly column for North East Connected. 

The Spring Budget is over, along with the constant speculation leading up to it.

This month’s might have arrived a little sooner than usual, but the effects will be talked about for a lot longer.

Budgets have a day-to-day impact and affect us all.

Sometimes budgets might only be designed to target certain sections of society, but the last couple have focused on trying to be all-encompassing.

The latest may not have suited everyone.

In the main, the Spring Budget 2024 was quite long reaching, particularly when you consider the further changes to National Insurance Contributions (NIC)

Let’s have a look at some of the main changes.

One of the big headlines was those NIC drops. The latest two per cent cut in Class 1

employee NICs means that in the last six months alone there has been a four percent cut for the employed.

In simple terms, that means, if you are on £50,000 a year then the NIC changes since

Autumn 2023 will save you £124.77 every month in 2024-25.

To take that a step further, and relate that NIC cut to a domestic bill, then, many people have gas and electricity monthly direct debits floating somewhere around that mark.

Suddenly, on the face of such figures, that NIC saving is significant.

If you weren’t aware yet, self-employed people will also benefit from a Class 4 reduction in NIC from eight per cent to six percent – and this in turn will mean a saving for those of us self-employed.

It was also a fantastic boost to young families, or those planning to have children, to hear the child benefit cap has increased from £50,000 to £60,000. That will be a welcome relief to some and one which people have campaigned for, for years.

The allowances for ISAs and Junior ISAs haven’t changed. There is a proposed addition of a British ISA and that will let savers invest an extra £5,000 tax free in UK equities.

Full details of the British ISA remain speculative at the moment, and it remains unclear how this will work in practice.

The whole reason the Chancellor took all the above steps is to boost the economy (and likely the political argument to try to win votes).

And the Office for Budget Responsibility (OBR) believes there is a more optimistic fiscal landscape following the budget.

The OBR has delivered an Inflation forecast to halve to below two per cent within months. It also predicts the economy will grow by 1.9 per cent next year.

Another boost is to property investors because the Capital Gains Tax (CGT) rate on non-exempt residential property gains will decrease from 28 to 24 per cent at the higher rate of tax.

It’s worth remembering however, you don’t pay CGT on your main residence.

But if you sold a property in your portfolio for £200,000 then, at the previous higher rate of CGT, you’d have paid £56,000. Now you would pay £48,000.

If you are a basic rate taxpayer, you will continue to be liable for 18 per cent on sale of said property. There was a significant development for the business community too.

The biggest one SMEs have welcomed is the introduction of the VAT registration threshold rising to£90,000 from £85,000.

That will ease the administrative burden and encourage growth for businesses close to this threshold.

These all sound hugely important but there are always caveats to a budget. This one was no different. Everything should be considered in a wider context.

Take, for instance, how the personal tax allowances and thresholds are set to remain unchanged until April 2028.

Together with the reduction in the dividend allowance from April 2024 and the CG exemption, those underscore the growing necessity for informed financial planning.

In one sense you are gaining but at the other end of the scale money is being taken away.

It is so important to plan ahead. Seek professional advice to ensure you make use of what exemptions you can. From budget to budget, things are ever changing.