The early trailers in January 2024 for what is probably Chancellor Jeremy’s Hunt’s last ‘fiscal event’ featured Prime Minister Rishi Sunak promising “more to come” on tax cuts. At the time, Mr Sunak’s bullish viewpoint puzzled some commentators because the Treasury had yet to receive even an initial assessment of the UK’s financial health from the Office for Budget Responsibility (OBR).
As Budget Day neared, a mix of OBR computation and the government’s expectation management dampened down the speculation around tax cuts and suggestions emerged about the possibility of counterbalancing tax increases. It began to sound as if the government’s election strategy would rely more on fiscal responsibility and less on the reductions in NICs or income tax demanded by many of its backbenchers.
In the event, the Chancellor delivered both tax cuts and, to a lesser extent, tax rises. The headline 2024/25 tax cut was another two percentage point reduction in the main rates of NICs for employees and the self-employed, with an initial cost of £10 billion. At only about 5% of that outlay, the easing of the thresholds for the HICBC was a welcome (and surprise) reform.
Tax rises included the predicted ‘adopting’ of the Labour party’s plan to abolish non-domicile taxation from April 2025 and, from the same date, the end of the furnished holiday lets regime. Together, these are projected to yield a little under £3 billion by 2028/29.
Nevertheless, the OBR says that Mr Hunt will meet his fiscal rule of debt falling as a proportion of gross domestic product (GDP) in 2028/29, by which time total borrowing will exceed £3,000 billion. The margin by which the Chancellor meets the rule is just £9 billion, which the OBR notes is
In summary:
BUDGET HIGHLIGHTS
- The main rate of class 1 employee national insurance contributions (NICs) will be cut from 10% to 8% with effect from 6 April 2024 and the main rate of class 4 self-employed NICs will also be reduced from 8% to 6%.
- The high income child benefit charge (HICBC) will be reformed, increasing the HICBC threshold to £60,000 from April 2024. The rate at which HICBC is charged will be halved so that child benefit is not fully withdrawn until individuals have an income of at least £80,000. HICBC will apply on a household rather than an individual basis by April 2026.
- An additional UK individual savings account (ISA) will be created with a £5,000 allowance in addition to the current £20,000 ISA limit.
- The higher rate of capital gains tax (CGT) for residential property disposals will be cut from 28% to 24% from 6 April 2024.
- The furnished holiday lettings tax regime will be abolished from 6 April 2025.
- The value added tax (VAT) registration threshold will rise from £85,000 to £90,000 from 1 April 2024. The deregistration threshold will rise from £83,000 to £88,000.
- The non-UK domicile rules will be replaced, from 6 April 2025, with a regime based on residence.
Contents:
Personal taxation
Pensions, savings and investments
Capital taxes
Welfare and family support
Business taxes
Value added tax
Tax administration
National insurance contributions