Budget 2024
BUDGET NEWS
We have summarised the key points relating to pensions and investments announced by the Chancellor in the Spring Budget on 6 March 2024.
Pensions
Lifetime allowance
From 6 April 2024, the lifetime allowance was abolished, with the Finance Bill removing the lifetime allowance completely from pensions tax legislation.
As a result of the abolition of the lifetime allowance the current lifetime allowance of £1,073,100 will be used from 6 April 2024 onwards to set a frozen upper monetary cap of £268,275 on pension commencement lump sums (tax free lump sum element of the pension), other than for individuals who already have a protected right to take a higher amount due to a valid lifetime allowance or pension commencement lump sum protection.
Annual allowance
The annual allowance, the limit on tax relievable pension savings an individual can make in a tax year is £60,000.
The money purchase annual allowance – the limit on money purchase pension savings an individual can make after accessing benefits flexibly, is £10,000. The minimum amount of the tapered annual allowance (which applies to high earners) will also stay at £10,000.
Investments and tax
ISA allowances
The adult ISA allowance will remain at £20,000 for the tax year 2024/25. The Junior ISA allowance and the Child Trust Fund allowance will also continue to be £9,000 in this tax year.
The chancellor also announced a new British ISA allowance of £5,000 with full details to be provided in due course.
Starting rate for savings income
The band for the zero percent starting rate for savings will remain frozen at £5,000 until 2028.
Trust taxation
From tax year 2024/25 onwards, trusts receiving income of up to £500 will not pay income tax. Where the settlor has created more than one trust, this threshold will be the higher of £100 or £500 divided by the number of trusts the settlor has set up.
Corporation tax
The main rate of corporation tax will remain at 25% and the small profits rate will be 19% for the financial year beginning on 1 April 2024, with intermediate companies paying a tapering amount between 19% and 25%.
2023/24 allowances and rates
| Income tax – allowances | |
| Personal Allowance* | £12,570 |
| Income limit for personal allowance | £100,000 |
| Marriage allowance | £1,260 |
| Dividend allowance | £1,000 |
| Personal savings allowance- basic rate taxpayer | £1,000 |
| Personal savings allowance – higher rate taxpayer | £500 |
| Personal savings allowance – additional rate taxpayer | Nil |
| * Reduced by £1 for every £2 of income over £100,000 | |
| Rest of UK income tax – rates | |
| Basic | 20% |
| Higher | 40% |
| Additional | 45% |
| Scottish income tax – rates*** | |
| Starter | 19% |
| Basic | 20% |
| Intermediate | 21% |
| Higher | 42% |
| Top | 47% |
| Welsh income tax – UK rates apply | |
| Savings rates | |
| Starting rate – limit first £5,000 of savings income | 0% |
| Savings rate – basic rate | 20% |
| Savings rate – higher rate | 40% |
| Savings rate – additional rate | 45% |
| Dividend rates | |
| Ordinary rate | 8.75% |
| Upper rate | 33.75% |
| Additional rate | 39.35% |
| Rest of UK (including Wales) income tax – bands | |
| Basic rate | £37,700 |
| Higher rate | £37,701–£125,140 |
| Additional rate | Over £125,140 |
| Scottish income tax – bands | |
| Personal allowance | £12,570 |
| Starter rate | £12,571 – £14,732 |
| Basic rate | £14,733 – £25,688 |
| Intermediate rate | £25,689 – £43,662 |
| Higher rate | £43,663–£125,140 |
| Top rate | Over £125,140 |
| Rate applicable to discretionary trusts | |
| First £1,000 of income | 8.75% for dividend income or 20% for other income |
| Rate applicable to trusts | 45% |
| Dividend rate | 39.35% |
| Pensions tax | |
| Standard lifetime allowance | £1,073,100 |
| Annual allowance | *£60,000 |
| Money purchase annual allowance | £10,000 |
| * Subject to Taper | |
| Capital gains tax | |
| Annual exemption (individuals and personal representatives) | £3,000 |
| Annual exemption (trustees) | £1,500 |
| Basic rate (other than residential property) | 10% |
| Basic rate (residential property) | 18% |
| Higher rate (other than residential property) | 20% |
| Higher rate (residential property) | 24% |
| Trust rate (other than residential property) | 20% |
| Trust rate (residential property) | 24% |
| Inheritance tax | |
| Rate | 40% |
| Nil rate band | £325,000 |
| Residence nil rate band | £175,000 |
| ISA thresholds | |
| Maximum investment | £20,000 |
| Junior ISAs | £9,000 |
| British ISA | £5,000 |
Trust Registration
HMRC published guidance in relation to changes to the Trust Registration Service (TRS), including associated processes and definitions under 5MLD (5th Anti-Money Laundering Directive). Trustees must now use the HMRC TRS site to registration of affected trusts. These changes have affected a large number of existing trusts that are not currently registered and registration should have been completed by 1st September 2022.
Every care has been taken to ensure that this information is correct and in accordance with our understanding of the law and HM Revenue & Customs practice, which may change. However, independent confirmation should be obtained before acting or refraining from acting in reliance upon the information given. This information is based on Budget announcement made on 6th March 2024.
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