Spring Budget 2024: How to boost your finances with the new changes

Turn the chancellor’s giveaway into next summer’s holiday. Plus, what the new British ISA means for you.

The chancellor’s latest 2p cut on national insurance gives workers around an extra £450 a year starting from 6 April. Combined with January’s 2p cut, announced last autumn, the average worker should save around £900 a year in national insurance.

The figure is based on someone earning £35,400, which the government said was the average salary last November.

There are several ways you could use this giveaway to boost your finances, from paying off debt to turning it into £1,136 in time for your summer holiday in 2025. For a holiday savings pot, it will help to ring-fence it from your normal spending by setting up a standing order to another account as soon as your salary’s paid.

4 ways to use the extra £900

  1. Cut your debt. Before you consider saving or investing money, the priority is to pay off debt on credit cards and loans, to get your finances into better shape so you’re not paying interest. To give yourself some breathing space on credit card debt, it’s worth considering a balance transfer credit card – our full guide compares these deals and you can check which cards you’re eligible for with our free checker that doesn’t affect your credit score. The key is to pay off your balance before the 0% period finishes.
  2. Switch your bank account and ring-fence the savings. If you took advantage of the current switching deal from NatWest, you’d get a £200 switching bonus plus access to a savings account paying 6.17% AER, which is a pretty decent rate. If you drip feed the bonus plus the extra £75 a month from national insurance savings into this high-earning savings account, you’d be saving £92 a month and have £1,136 in a year.
  3. Invest it with a stocks and shares ISA. From 6 April, the tax-free allowance on capital gains will halve to £3,000 a year. So it’s more important than ever to take advantage of tax-free ISAs if you plan to invest. Historically, stock markets have tended to give a better return than cash savings over long periods of time, so you could consider an exchange-traded fund that tracks global stock markets. Our guide on how to buy shares explains more about what to consider.
  4. Top up your pension. If you don’t need the cash you’re saving straight away, consider topping up your pension as this could be worth much more when you eventually retire. The wealth manager Evelyn Partners says a 25-year-old earning £35,000 could be nearly £80,000 better off by age 67 if they paid the (roughly) £37 a month saved with the latest NI cut straight into their pension monthly.

How much will you save on national insurance?

Salary (£)12% NI (£)Saving with 8% NI, from 6 April, 2024 (£)
30,0002,091.60697.20
34,9632,687.16895.72
40,0003,291.601,097.20
50,0004,491.601,497.20

Table source: Quilter

While the cut in national insurance will be welcomed by many workers, the downside is that the chancellor did nothing to tackle income tax bands, which haven’t been rising in line with wage increases. According to the Institute for Fiscal Studies think tank, about half of employees – the 14 million earning between about £26,000 and £60,000 a year – will be better off from the latest changes but any other employees earning enough to pay national insurance or income tax will be worse off, because the cuts to national insurance “are more than offset by other tax rises”.

A huge issue for UK workers is the thresholds at which they start paying income tax, and pay it at a higher rate. These thresholds haven’t changed since the government froze them in 2021 – even though we’ve had huge increases in inflation and wages have risen. So more people are paying tax, or paying it at a higher rate, even though their money has less spending power. And the freeze is due to last until 2028. The chancellor has shied away from dealing with this stealth tax.”

Liz Edwards, Finder money expert

The new British ISA

Any gains from ISAs are tax-free, but there’s an annual limit to the amount you’re allowed to put in ISAs, which is £20,000 in the tax year 2023-24.

The chancellor announced in the Autumn Statement a major shake-up in ISAs which means that from next month, you’ll be able to open and pay into more than one stocks and shares ISA each year, though the annual limit for paying into ISAs stayed at £20,000 a year.

Now, he’s announced a British ISA which allows you to put an extra £5,000 a year into an ISA that invests in UK firms, on top of the £20,000 annual limit.

What’s important is that investors are aware of the recent underperformance of the FTSE when compared to a lot of other global markets. However, this is already a dilemma for investors – adding extra allowance simply gives them another opportunity to invest that they don’t need to take if they don’t wish to.”

Matt Mckenna, Finder investing expert

The new British savings bond

Alongside the announcement of the British ISA, the chancellor also announced a new British savings bond which will be offered through NS&I. It will have a guaranteed rate, fixed for 3 years. However, what that rate is has not yet been revealed.

The new bond will need to have a rate of over 5% to make it competitive against similar products on the market. Alternatively, due to the greater protections offered by NS&I (100% of your savings are guaranteed), if it allowed for very large deposits it could pique the interest of savers looking for a safe haven for their cash.”

Kate Steere, Finder housing & savings expert

Child benefit income threshold changes

The chancellor has announced that from this April, the high income threshold for child benefit will rise from £50,000 to £60,000, with those earning between £60,000 and £80,000 still eligible for a tapered payment. Currently, families where one parent earns over £60,000 are not eligible for any child benefit, with payments starting to taper off for individuals with an income of over £50,000.

The current rules around child benefit are complex and widely recognised as unfair. Currently, a couple can earn a combined income of £100,000 a year and get full child benefit. But a single parent earning £60,000 a year, and a couple in which one parent earns £60,000 a year, or more, get none.

The chancellor also indicated that he would go further to tackle this imbalance, with an assessment based on household level income, rather than individual income, set to be introduced in 2026.

The Budget announcement goes some way to addressing the disparity in the child benefit system around the high income threshold. Many families will welcome the rise from £50,000 to £60,000 for the point where child benefit payments start to taper off. But it won’t be until 2026 when household income rather than the highest earner’s income is the decider in setting child benefits payments.”

Michelle Stevens, Finder personal finance expert

What wasn’t in the Budget: Changes to the lifetime ISA

Prospective homebuyers were hoping the chancellor might reform the lifetime ISA, which is a tax-free savings or investment account that you can open if you’re aged between 18 and 39. It’s designed to help you save for your first home, or for retirement, and comes with a 25% government bonus of up to £1,000 a year.

The average house price has increased from £218,642 in April 2017 when the lifetime ISA scheme was launched, to £284,691 in December 2023. This is an increase of just over 30% – but the maximum property value you can buy using your lifetime ISA remains unchanged at £450,000.

The chancellor has missed another opportunity to improve the conditions for first-time buyers. By ignoring the significant house price growth in the past couple of years and leaving lifetime ISAs untouched, he has failed to address the issues that many face in trying to get on the property ladder.”

Kate Steere, Finder housing & savings expert
The value of investments can fall as well as rise, and you may get back less than you invested. Past performance is no guarantee of future results. A stocks and shares ISA may not be right for everyone and tax rules may change in the future. If you are unsure if an ISA is the right choice for you, please seek independent financial advice.

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