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The 2024 UK Budget Highlights

1: National Insurance Cut

Details: The 2024 UK Budget includes a significant reduction in employee National Insurance cut and contributions. The current rate of 10% will be cut to 8%, which means employees will have more disposable income. This measure is designed to provide immediate financial relief to workers, with estimated savings of up to £450 per year per worker.

Impact:

  • Workers: Increased take-home pay will help workers manage living costs more effectively.
  • Economy: By putting more money in the pockets of consumers, the measure aims to stimulate spending and support economic growth.
  • Businesses: Employers may see indirect benefits as employees have more disposable income, potentially increasing demand for goods and services.

2: Fuel and Alcohol Duty Freeze

Details: The fuel duty, which includes a 5p cut introduced in March 2022, will be frozen at 52.95p per liter for another 12 months. Similarly, alcohol duty will remain at its current rate until 1 February 2025. These freezes are part of efforts to control inflation and reduce the cost of living for consumers.

Impact:

  • Consumers: Continued savings on fuel and alcohol costs will ease financial pressure on households.
  • Inflation: By keeping these duties steady, the government expects to help lower inflation by 0.2 percentage points.
  • Hospitality Sector: The alcohol duty freeze is particularly aimed at supporting the hospitality industry, which has been hit hard by economic uncertainties.

3: Introduction of British ISA and Savings Bond

Details: A new British ISA is being introduced to encourage investment in UK assets, providing savers an additional £5,000 allowance on top of the existing £20,000 ISA limit. Additionally, a British Savings Bond from National Savings and Investments (NS&I) will be available, designed to promote long-term saving with a three-year term on sums ranging from £500 to £1 million. The exact interest rate for the bond will be announced later but will aim to balance the interests of savers, taxpayers, and the financial sector.

Impact:

  • Savers: These measures provide attractive options for individuals looking to maximize their savings and investments, especially in a low-interest environment.
  • UK Economy: Encouraging investment in UK assets can help support domestic financial markets and economic growth.
  • Long-term Savings: The British Savings Bond is particularly aimed at promoting long-term financial planning and stability.

4: VAT Registration Threshold Increase

Details: The VAT registration threshold will be increased from £85,000 to £90,000 starting from April 1, 2024. This change is aimed at reducing the tax burden on small and medium-sized enterprises (SMEs) and supporting their growth by allowing more businesses to operate without the need to register for VAT.

Impact:

  • Small Businesses: Over 28,000 businesses are expected to benefit from this increase, as they will no longer need to register for VAT. This reduces administrative burdens and costs associated with VAT compliance.
  • Growth and Investment: By easing the tax obligations for SMEs, the government aims to stimulate growth and encourage investment within this sector.
  • Tax Revenue: While this measure is intended to support small businesses, it may result in a slight decrease in VAT revenue for the government in the short term.

5: Debt Relief Order Fee Removal

Details: From April 6, 2024, the £90 administration fee for accessing a Debt Relief Order (DRO) will be removed. DROs are a form of insolvency designed for individuals with low income, low assets, and relatively small amounts of debt who cannot afford to pay their debts.

Impact:

  • Individuals in Debt: Removing the fee makes it easier for those struggling with debt to access relief, potentially preventing financial situations from worsening.
  • Households: This measure provides significant support to households facing severe financial difficulties, offering a pathway to resolve unmanageable debts.
  • Financial Stability: By providing an accessible route to debt relief, the government aims to improve overall financial stability for vulnerable populations.

6: Support for Pensions

Details: The government reaffirmed its commitment to the pension triple lock, which ensures that the state pension rises annually by the highest of three measures: average earnings growth, inflation, or 2.5%. For the 2024/25 period, this commitment will result in the full yearly amount of the basic state pension being £3,700 higher in cash terms compared to 2010.

Impact:

  • Pensioners: This measure guarantees a stable and potentially increasing income for pensioners, helping them keep pace with living costs.
  • Cost of Living: By maintaining the triple lock, the government helps protect pensioners against inflation and other economic fluctuations.
  • Public Spending: Although beneficial for pensioners, the triple lock commitment represents a significant and growing cost to public finances.

These points highlight the government’s focus on supporting small businesses, providing financial relief to indebted individuals, and ensuring stable incomes for pensioners.

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