Let's talk about money, part two
The budget decoded: 9 things you need to know. Plus the answers cut from my Fame & Fortune interview in last week's Sunday Times
I never used to pay much attention to ‘the budget’. It always seemed irrelevant to my reality. I wasn't investing, I don't have an inheritance, or more than one home, and what I earn covers my bills and expenses with a bit on the side for savings which just sit in my business bank account. But this year, as mentioned in my previous Let’s Talk About Money post (see link below), I resolved to become a grown-up about money aka make it work harder for me. So this time I paid attention to the chancellor.
Here are the 9 things that seemed most relevant…
NS&I to launch new British Savings Bond. A fixed rate bond to support British companies will be launched in April 2024 via National Savings & Investments (NS&I) aka the Premium Bonds people. British Savings Bonds will offer a guaranteed interest rate for three years, increasing the options for where to save. Bonds are usually a good bet for savings if you have any ‘spare’ cash that can be locked away for a while, as the returns are guaranteed by the government.
National Living Wage increased. The National Living wage will increase from April 2024 to £11.44 per hour for adults aged 21 and over (up from £10.42 per hour, for those aged 23 and over, and up from £10.18 for 21-to-22-year-olds. It’s now set at £8.60 per hour for 18-to-20-year-olds (up from £7.49); and £6.40 per hour for under 18s and apprentices (up from £5.28). If you employ people this will have a direct impact on your salary outlay. And if you pay for services (from a cleaner to a dog walker) you’ll likely now be paying more to cover this.
Holiday Lettings Tax Relief Scrapped. If you own a buy-to-let and rent it out furnished, then this one’s for you. At the moment, landlords with furnished holiday lets (FHL) can deduct the full cost of their mortgage interest payments from their rental income and (potentially) pay lower capital gains tax when they sell. About 127,000 properties in the UK are registered under the FHL scheme. But no more. The Chancellor is abolishing the tax relief starting April 2025.
Free childcare hours extended. Parents of three- and four-year-olds already receive 30 hours free childcare and the plan is to extend this to all children under 5 by 2026. The extension of 15 hours free childcare to two-year-olds will start from April 2024 for working parents and carers in England. But from September 2024, this will be extended to include babies from 9 months old.
Lower Capital Gains Tax (CGT) for second homes. As it stands, higher-rate taxpayers pay 28 per cent CGT on residential property profits, but this will be cut to 24 per cent. CGT on property sales is paid on the gain in value (ie how much a property has increased in worth from the original sale price) of non-permanent residences such as buy-to-lets, second homes and holiday lets.
ISA allowance increased via new British wrapper. Investors will have a dedicated tax-free individual savings account (ISA) allowance for UK shares. The measure is meant to entice investors to allocate more to UK stocks. You can invest up to £5,000 tax-free (over and above the current £20,000 tax-free annual allowance). However, no date has as yet been set for its introduction.
National Insurance contribution rate cut. The employee national insurance rates will fall from 10 per cent to 8 per cent from April. Self-employed national insurance will also decrease by 2 percentage points from 8 per cent to 6 per cent. So if your annual salary is about £30,000, you might take home an additional £300 a year. Best thing to do with the saving? Put it into a Pension and benefit from the tax relief created by your contributions being topped up by the government. An example from the Sunday Times spelt it out like this: a 35-year old earning £60,00pa will take home an extra £63pm. With tax relief this could be topped upto £105 if they added it to their pension. By the age of 67, this could mean an additional £99,540 in the pensions pot.
Child Benefit being reformed. Finally it looks like this ridiculous system is beginning to be sorted. Previously, you could claim full child benefit if you earn upto 50K but this meant that a couple each earning £49,999 ie a total household income of almost 100K could claim a full allowance, while a single parent earning £50,001 could not. Now the income threshold under which you can claim has been raised to £60,000 (with a cap of £80,000 before you lose it all) and in the future, income will be accessed as a sum of the total household income, so much fairer. But this involves complicated HMRC changes apparently, so we won’t see that for another few years. To note, applying for child benefit (for a child under the age of 12) also means you automatically accrue NI credits, which can contribute towards a state pension.
Pension payments increased. The new state pension will increase to £221.20 per week for those reaching State Pension age on or after 6 April 2016, up from £203.85 in 2023/24. If you’re not sure whether you’re eligible for a state pension (it depends on your record of NI contributions), or how much you might get, you can check using this link: www.gov.uk/check-state-pension
Special Interior Design Masters Subscription sale!
Redeem before the end of the series for 25% off for a whole year, and get access to all my personal Behind the Scenes intel, gossip and pictures.
Sunday Times Fame & Fortune Interview
The answers they didn't run (and some they did)…
How much is in my wallet? About 3p, a button and few safety pins.
Are you better off than your parents? I think so. But only because when my father died five years ago, I uncovered a lot of credit card debt. Not profligate spending, simply day to day expenses, which I think is worse, it made me very sad. It’s probably why I don’t use credit cards today. He had nine. He should never have been approved for nine separate cards. I’ve no doubt that the financial stress contributed to his developing cancer.
“A healthy person has a thousand wishes, but a sick person has only one.”
When did you first feel wealthy? I’ve realised that wealth has very little to do with money. But I’m not naiive, money enables increased options for some of life’s challenges, but bottom line, health is the only true wealth. As the proverb goes, “A healthy person has a thousand wishes, but a sick person has only one.” This is why helping people to create environments in which they can become their best healthy selves, is my absolute mission, whether profitable or not.