National Insurance and Capital Gains
One of the biggest Conservative manifesto pledges was an increase in the National Insurance threshold and the government stayed true to its word. From next month, the threshold at which people will be required to pay National Insurance will rise from the current £8,632 to £9,500. It is set to save around 31 million workers up to £104 a year. The Chancellor also reiterated the party’s pledge to eventually raise the threshold to £12,500.
The Capital Gains Tax threshold also will increase from £12,000 to £12,300 as of April. The move will save higher and additional-rate taxpayers with gains above the limit £60 a year and basic rate taxpayers £30 a year on non-property assets.
Fund management and businesses
In a bid to make the UK more attractive as a place for asset managers to set up business and base their funds, the government has announced plans to carry out a review. It will explore aspects like changing the tax regime, regulation and VAT treatment of funds in order to ensure the UK remains competitive in a post-Brexit landscape.
Following rumours that the government would look to significantly reform or even abolish entrepreneur’s relief, the Chancellor unveiled plans to cap relief at £1 million for any one person, opposed to the previous £10 million cap.
Griffin commented: “By the Government’s own admission it has chosen to reform this relief following evidence that the rule has done little to incentivise entrepreneurial activity and in fact mainly benefitted a small number of very affluent taxpayers.
“However, Sunak chose not to go the whole hog and scrap the relief altogether in a bid to continue to encourage genuine entrepreneurs who do rely on it. It is improbable that these changes are going to have any material impact on entrepreneurialism in the UK and may give the Treasury more money to play with going forward.”
What didn’t ‘get done’?
In his debut Budget, the Chancellor failed to touch upon the widely-debated subject of social care.
Commenting in this, Griffin said: “In his effort to stay in the good books the Chancellor dodged some of the biggest issues despite his huge emphasis on “getting it done”. Social care received a cursory mention at the end of the speech with the government committing to tackling the issue with cross-party support but leaving out any timelines or details.
“Despite the clear problems with social care, this seemingly never-ending saga continues with no end in sight and no concrete solutions presented by the government on how they plan to fix it. This ultimately means that family and friends are left to pick up the pieces and millions of unpaid carers are propping up the system. Many have to forgo their own financial and personal wellbeing in order to do just that. This is a crisis that is reverberating throughout many corners of the economy.”
The Chancellor will be required to reset the welfare cap, which will come into play for spending for the 2024-25 tax year and has set the cap at £137.2 billion, with the flexibility to pay 3% more than that. The cap includes how much is spent on the carer’s allowance, the attendance allowance and pension credits. How these allowances and the threshold interact with changes with social care, however, remains “anyone’s guess,” according to Griffin.
Aegon’s Cameron described the lack of detail as “deeply disappointing” and called for the government to devise a system to tackle the situation.
He said: “The Government needs to urgently set out a fair and sustainable system, ideally with cross-party support, detailing what the Government will pay and what individuals will be asked to fund themselves, based on their housing and other wealth.
“Individuals then need incentivised to plan ahead. In our view a cap on what individuals are required to pay is essential here to avoid fear that ‘catastrophic’ care costs will wipe out their life savings and inheritance aspirations.”
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