With UK economic growth flatlining, the Chancellor was not afforded the fiscal headroom he desperately wanted to deliver the kind of tax giveaways that could power the Conservative Party’s election campaign.

Here, we round-up what the Chancellor unveiled, explain what this could mean for you, and look at the current economic picture.

Economic outlook

The Chancellor claimed the UK has “turned a corner on inflation”, saying price rises are expected to fall below 2% in a few months’ time – though this was something we knew already.

He also said that UK borrowing will fall to 1.2% in 2028-29, its lowest level since 2001.

With regards to Gross Domestic Product, or GDP, the Office for Budget Responsibility (OBR) forecasts that the UK will grow 0.8% this year, with growth ticking up to 1.9% and 2.2% in 2025 and 2026, respectively.

National Insurance contributions cut

Pre-Budget rumours pointed to a cut in personal taxes, with early reports suggesting income tax was on the chopping block. But due to smaller-than-expected headroom, the Chancellor has decided to cut employees’ and self-employed National Insurance contributions (NICs) for the second time in a matter of months.

The main rate of employee Class 1 NICs will drop from 10% to 8% from April. Taken with the 2% cut that was introduced on 6 January, the Chancellor claims the reduction will save the average employed worker £900 a year.

Meanwhile, the main rate of Class 4 NICs, paid by self-employed workers on profits, will drop from 8% to 6%, also from April. The Chancellor claimed the average self-employed worker on £28,000 will save £650 from the new tax year.

Less of your salary being taken before you receive it is always good news and extra money each month will be welcomed. Either earners can increase their expenditure, which might be a consideration if you’ve had to cut back in places due to the cost of living, or you can choose to save or invest that little extra each month.

For those of you that can afford to squirrel away the extra money into savings to let it grow over time – whether that’s into a savings account you can dip into easily in emergencies or perhaps investing it for your future, for example by contributing a bit more to your pension – this could get you valuable tax relief and maybe even a matching payment from your employer.

Launch of a British ISA

There was positive news for some savers with the Chancellor announcing the government will launch a British individual savings account (ISA), to encourage investment in UK businesses.

The policy will give savers an extra £5,000 a year to invest in UK-listed companies and shelter those savings from tax, which will be in addition to the current £20,000 allowance.

ISAs have – and continue to be – a popular and powerful savings and investment tool. Anything that encourages people to look at how they save for the future and gives a tax-efficient way of doing that is welcomed. If that can also boost the economy and potentially give wider benefits, then the Chancellor’s focus is understandable. However, further detail on how the ‘British ISA’ will work in practice and which investments will qualify is still needed. The key to successfully encouraging saving is to keep it simple. Additional rules and regulations could be confusing and put people off.

Pension pot for life

Despite opposition from some quarters, the government has confirmed plans to push on with its ‘pension pot for life’ consultation. This will allow you to ask your employer to pay into a pension of your choice, instead of being forced to join your company’s scheme.

A commitment to explore the concept of a ‘pension pot for life’ is encouraging, as anything that not only inspires savers to engage more with their retirement planning, but also makes the process simpler, is positive. But, the devil is in the detail. More information about when this will be developed and how it could work is still needed.

Capital gains tax cut

It was a Budget light on surprises, but one exception was the decision to reduce the top rate of capital gains tax (CGT) on sales of properties that do not benefit from an exemption by virtue of being a main home from 28% to 24%.

This is still higher than the 20% top rate of CGT that you pay when selling other assets, such as investments held outside of tax wrappers, but will help thin the tax bills of those with multiple properties when the time comes to sell up.

The Chancellor announced that multiple dwellings relief will be abolished from June “after showing no evidence of promoting investment in the private rented sector". This will raise £385 million a year.

In addition, the furnished holiday lettings tax regime will be abolished from April 2025, “raising £245 million a year while making it easier for local people to find a home in their community,” according to gov.uk.

VAT boost for businesses

There was good news for small businesses as the Chancellor announced the VAT registration level is being raised from £85,000 to £90,000 from 1 April – the first increase in seven years. However, this was below what many had expected and indeed hoped.

Non-dom tax status scrapped

Speculation grew before the Budget that the government would axe non-dom tax rules to free up some cash to fund further tax cuts should the Conservatives win the coming election. And these rumours proved true.

From April 2025, non-domiciled individuals (UK residents whose permanent home is outside the UK) will not be required to pay tax on foreign income and gains for the first four years of residency, though will pay the same tax as other UK residents once this period has expired.

The Chancellor said the measure is expected to raise £2.7 billion a year by the end of the forecast period.

The policies that didn’t make the cut

Income tax: The Chancellor’s decision not to cut income tax will have disappointed many. For earners, the cut in NICs will soften the blow, but for others this will be a continuing challenge.

No U-turn on CGT and dividend allowances: The Chancellor also resisted calls to row back on the decision to halve the capital gains tax (CGT) and dividend tax allowances from April, meaning they will fall to £3,000 and £500, respectively.

Investors with holdings outside of tax wrappers should therefore tread carefully from next month onwards and consider using pensions and ISAs where appropriate.

Inheritance tax (IHT) reform absent: Inheritance tax (IHT) is no longer the ‘wealth tax’ it once was. Rising asset values, coupled with frozen allowances and hugely complex rules, has increasingly put people at risk of being hit with an unexpected, and potentially considerable, tax bill after the death of a loved one.

Despite that, the allowances remain frozen and the rate has not been changed so that risk remains. People understandably want to pass on as much as they can to loved ones and understanding the rules around inheritance tax can help you reduce, or even get rid of, that tax bill. Whether that’s using gift allowances which allow an individual to pass on money to loved ones, establishing a trust or making use of business relief, the ‘right’ way depends entirely on your individual circumstances.

We’re here to support you

If you have any questions about what the changes could mean for your personal finances, we’d encourage you to get expert guidance, either through free online services or paid-for advice. If you already have an abrdn financial planning adviser, get in touch with them. Or find out more about how our financial planning services could help you.