What was announced in the Spring budget and what does it mean for you? (Updated 7/3/2024)
Chancellor Jeremy Hunt has delivered the latest budget, which is possibly the last one by the current government before an election later this year.
Before the bid red box was opened, there was lots of speculation about what might happen, especially with income tax and national insurance contributions. Everyone was hoping that the government would attempt to woo prospective voters by giving us all more take-home money each month.
HyperJar published a blog post predicting potential areas of reform, explaining how these would directly affect the average person’s wallet if they took place.
Now that everything has been revealed, let’s revisit our predictions and see how close we were (or not!) We’ll also look at what the actual plans announced and explain what that means for you and your family.
Did Jeremy Hunt cut taxes in the spring budget?
Our prediction:
The latest public sector finances data shows the government had a record £16.7 billion surplus in January, the largest since records began in 1992. Borrowing over the current financial year was also £9.2 billion lower than the Office for Budget Responsibility (OBR) had forecast. This could leave some room for tax cuts.
If tax is cut, it would mean that you have more money to play with in every payslip. However, it’s not necessarily a good thing for homeowners. Putting money back into people’s pockets could fuel more price rises, which keeps interest rates higher for longer. This would be bad news for anyone with a mortgage up for renewal anytime soon.
The result:
This didn’t happen. What did happen in regards to tax, was actually worse for middle income families as Jeremy Hunt didn’t move income tax thresholds.
Workers in England, Wales, and Northern Ireland start paying 20% income tax on earnings over £12,571, then 40% on earnings over £50,271 and this hasn’t changed since 2022. As wages are rising, this means more people will be liable to pay 40 per cent tax. According to an FTAdviser report, 1 in 10 taxpayers paid the higher rate of Income Tax in 2010/11. It’s estimated that by 2024/25, this will rise to 1 in 5.
Can we expect national insurance cuts in the budget?
Our prediction:
Trimming National Insurance would be cheaper for the government than cutting income tax. A 2p cut in income tax would have cost £13.7 billion a year, while 2p off National Insurance would cost £9 billion and a 1p cut would cost less than a third, at £4.5 billion.
Although a penny reduction doesn’t sound like much, someone earning £35,000 a year would potentially save £224.30 a year, while anyone on a salary of more than £50,270 could save £377.
The result:
The chancellor slashed National Insurance by a further 2p in the pound, matching a previous cut in January.With it, he said the change to NI would be worth £450 a year to an employee on an average salary of £35,000.
Anyone earning enough to pay higher-rate tax will take home £754 a year more than expected.
However, pensioners do not benefit from these changes.
What will happen to inheritance tax?
Our prediction
Latest figures show that fewer than one in 20 estates pay inheritance tax. Specifically, nearly 4% of deaths result in the payment of inheritance tax, which is about 27,000 estates a year. That’s mainly because married couples and those in a civil partnership can use each other’s allowances to ensure that the threshold on transferring assets to children is £1 million.
However, due to rising property prices, more and more people are being taxed every year.
Theoretically, it’s a straightforward tax to abolish. People benefitting from the abolition or reduction to inheritance tax are unlikely to go out and spend an inheritance straight away. So - unlike cutting income tax - it might not lead to a rise in inflation, or the rate of rising prices, which the government and Bank of England want to control.
That means it should only affect you in a positive way if your family’s assets are worth more than £1 million (and lucky you!)
The result
The chancellor shelved this before the budget, so there were no cuts. Perhaps he was put off by the perception that changing this would only bring relief to the wealthy and he wanted the government to be seen as making changes that would affect all kids of people.
Families hold a lot of voting power, which could explain the decision to change child benefit (as we explain more below)
Holiday Lets Clampdown
Our prediction:
Hunt is rumoured to be planning to fund tax cuts with a raid on furnished holiday let (FHL) reliefs.
Currently, owners of FHLs can benefit from full mortgage interest relief and a lower 10% capital gains tax rate.
The chancellor could cut back on these perks and reportedly raise £300 million to fund tax cuts elsewhere.
The result:
This happened with the abolition date of April 2025. It could mean that several landlords rush to sell their holiday let properties to benefit before then, making it harder to find holiday accommodation. But its a great thing in the long-term as it means the government will have made millions to fund the national insurance cuts that cactually make more of a difference to the average person.
99% mortgages
Our prediction:
A 99% mortgage is a loan that covers most of the cost of the property you're buying.
With the average UK house price standing at £290,000, this could mean wannabe buyers getting on the ladder with a 1% deposit of just £2,900.
Most lenders usually require at least a 10% deposit, which would be £29,000 based on the average UK house price.
The scheme would allow first-time buyers to guarantee a mortgage with just a tiny deposit.
It’s a big move, so we can’t guarantee it will happen, but the government does currently run a mortgage guarantee scheme for first time buyers with a 5% deposit
The result:
The government decided this was a bad idea. In fact, it’s almost impossible to find somebody who thought it was a good idea, with warnings they risked pushing house prices up further, and exposed borrowers to risky lending they might not be able to afford.
Universal Credit budget advances
Our prediction:
The Universal Credit budgeting advance is an interest-free loan that can be used to cover certain expenses like household furniture and equipment, and clothing. It is a loan, which means you have to pay it back. Currently, that is over a 12 month period, but there could be plans to extend that to 24 months to reduce the monthly payments.
Through spreading repayments across a longer period of time, it makes it easier for people on lower incomes to pay without getting themselves further into debt.
The result:
This happened, which is good news for low income families,
Also, Hunt announced plans to increase Universal Credit payments by 6.7% If you’ere on Universal Credit, it will mean you get extra money each month, aligned to what benefits you’re receiving. The Department for Work and Pensions estimate it will make the average family on Universal Credit £470 a year better off.
Child benefit changes
Our prediction:
Despite hearing some rumours of reform from the legendary Martin Lewis, we didn’t predict anything, which makes what happened a pleasant surprise.
The result:
The Chancellor raised the threshold at which child benefit stops being paid from £60,000 to £80,000. This hadn’t changed since 2013, which meant more and more families were not able to claim child benefit.
Hunt says nearly 500,000 families will be better off by an average of £1,260 in 2024-25 as a result of his changes. For some the gain will be bigger, up to £2,212 a year for some parents with two children.
However, if you earn under £50,000 then you won’t see any difference at all.50,000 it won’t affect you at all
Early Years reform
Our prediction:
It was announced last spring that there would be an increase in childcare available for working parents, but we weren’t sure if there would be any update in this budget. We were pleasantly surprised.
The result:
Hunt announced that hourly early-years funding rates would increase in line with delivery costs over the next two years, representing an additional investment of around £500m. This will ensure that nurseries can deliver the free hours without going bankrupt. This is good news for anyone with children under school age.
What did we learn from the spring budget?
We realised that we are not great at predicting budgets.
We were right about national insurance cuts and holiday lets and had some inkling about Universal Credit changes but we missed the big child benefit changes.
The child benefit changes should help hundreds of thousands of families who have one parent earning between £50,000 - £80,000 a year. Meanwhile, the Universal Credit payments will help those on the lower incomes. However, anyone earning between £20,000 to £50,000 will see the least impact from the spring budget. These people can expect to save a few hundred on national insurance contributions, but are otherwise no better off.
It was good to see the chancellor announce plans to fund nurseries and early years settings better, paving the way to make it easier for parents to get back to work after having children.
How can HyperJar help following the spring budget announcement?
HyperJar makes it easy to see and organise your money, so that you can plan for different events.
Once you’ve worked out your budget for a month, taking into account any income that may have changed due to tax cuts, you can divide it into different jars. You can also create shared jars to share the cost of nights out and holidays with friends.
When it’s time to spend your money, you can use HyperJar cashback vouchers to get money back instantly. If you add up how much cashback you can get each month, simply by spending as you normally do, you may find you benefit more from that than from any government reforms.
If you haven’t yet downloaded HyperJar you could benefit from our Love Cashback offer, where you get cashback on everything you buy using your HyperJar card.. Sign up before 31 March 2024 to get 1% cashback on all monthly spending up to £500.00 and 1.5% on spending above this for up to six months
How can HyperJar help following the spring budget announcement?
HyperJar makes it easy to see and organise your money, so that you can plan for different events.
Once you’ve worked out your budget for a month, taking into account any income that may have changed due to tax cuts, you can divide it into different jars. You can also create shared jars to share the cost of nights out and holidays with friends.
When it’s time to spend your money, you can use HyperJar cashback vouchers to get money back instantly. If you add up how much cashback you can get each month, simply by spending as you normally do, you may find you benefit more from that than from any government reforms.
If you haven’t yet downloaded HyperJar you could benefit from our Love Cashback offer, where you get cashback on everything you buy using your HyperJar card.. Sign up before 31 March 2024 to get 1% cashback on all monthly spending up to £500.00 and 1.5% on spending above this for up to six months.
HyperJar up to 1.5% cashback offer on your everyday spending
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