It's time for a fresh look at this year's Fall Financial Update, and let me tell you, it's filled with noteworthy developments!
Set against the backdrop of post-Brexit and COVID-19 challenges, alongside inflation and living cost concerns, this budget reveals quite the fiscal storyline. Is the Fall Financial Update ever mundane? Hardly!
We're diving deep into the details, and you'll want to soak up every bit of it. So, let's dive in.
What is the Fall Financial Update?This annual presentation by the UK's Finance Minister outlines the government's financial strategy, including spending and revenue generation for the upcoming tax year.
The anticipation builds each year, as adjustments to tax policies are expected—hopefully for the better
So, what's new this time around?
Rise in National Living Wage
Kicking off with some positive news:
Starting April 2024, the National Living Wage (NLW) will increase to £11.44 per hour for individuals aged 21 and above (previously for those 23 and over).
Currently, at £10.42 per hour, this boost is a welcome relief amid the ongoing cost of living crisis.
National Insurance Adjustments
2024 will bring lower National Insurance contributions for both the self-employed and employees.
Self-employed individuals will see the elimination of Class 2 National Insurance contributions, currently £3.45 weekly. This equates to annual savings of £179. Additionally, the primary Class 4 National Insurance rate will be reduced from 9% to 8% for earnings above £12,570, starting in April 2024.
For employees earning £12,570 to £50,270, the basic tax rate payer's National Insurance will decrease from 12% to 10% beginning 6 January 2024, as stated by the Finance Minister, allowing individuals to retain more of their earnings ahead of the new tax year.
Revamping Individual Savings Accounts
ISAs, tax-exempt savings accounts with an annual limit of £20,000, come in various forms, each with unique rules and purposes.
Changes coming from April next year aim to simplify personal finance management regarding ISAs. These enhancements include:
- Multiple subscriptions to the same type of ISA within a year
- Transfer of partial funds within the same year
- Elimination of the need to reapply for a dormant ISA
- Inclusion of fractional shares and Long-Term Asset Funds within ISAs
The goal? Beyond encouraging savings, the government aims to stimulate investment in companies listed on the London Stock Exchange A mutual benefit, indeed?
Pension Triple Lock
The triple lock mechanism safeguards the State Pension's value, crucial amid rising living costs
This ensures the State Pension grows annually by the highest of the following three: inflation (10.4% as of March 2023), average wage increases (currently 5.5%), or 2.5%.
Despite speculation, the triple lock remains intact, with an 8.5% increase in the State Pension for the 2024/25 period, reaffirmed by the Finance Minister. A positive outcome!
Alterations in Tax Return Thresholds
The criteria for high earners required to submit a Self Assessment tax return have been updated. Previously, tax returns were necessary for high earners receiving all income through PAYE (pay-as-you-earn) and earning £150,000 or more.
From the 2024/2025 tax year, if all your income is through PAYE, regardless of amount, you'll no longer need to file a Self Assessment tax return. However, notification to HMRC may still be required. Stay tuned for further instructions.
It's important to remember, if you have self-employment or rental income alongside PAYE or other reasons to file, you must continue as before.
Additional Fall Financial Update Highlights
The update included several other key changes:
- Freeze on all alcohol duties until next August
- Tobacco duty rates increase this month
- A 6.7% rise in benefits, matching September's inflation rate
- A Back to Work Plan to reintegrate 1.1 million people into the workforce
- Reduction of the tax rate for loss-making companies from 25% to 19%
And that's just the start. Though there was no talk of the rumoured Inheritance Tax rate cut, the detailed HMRC statement provides a deeper dive into these adjustments—brace yourself for the technical lingo!
