Chancellor Jeremy Hunt has delivered the Spring Budget 2024 in the House of Commons today. The Chancellor delivered lower taxes, more investment and better public services in a ‘Budget for Long Term Growth’
Here are the key announcements at a glance..
Inflation
Chancellor Hunt opened his Spring Budget address by acknowledging the economic challenges faced by households and is optimistic about inflation. The UK Chancellor, Jeremy Hunt, is optimistic about inflation. He expects it to fall below the government’s target of 2% within a few months, which is much sooner than originally anticipated. This significant drop comes after inflation peaked at 11.1% in 2022 and has since been steadily declining, partly due to easing food and energy prices.[1] However, he highlighted a positive revision – thanks in part to government support – as the OBR now expects disposable income to rise by 0.8%. This upward trend in income forms the backdrop for Hunt’s further measures aimed at helping families manage the ongoing cost-of-living pressures.[2]
New British ISA announced
Chancellor Hunt has unveiled a significant enhancement to tax-free savings and investments with the launch of a new ISA allowance today. The British ISA initiative introduces an additional £5,000 allowance annually for investments in UK equity, providing savers with a boost to their tax-free investment options. Under this new scheme, individuals will be able to invest an extra £5,000 tax-free each year in UK assets, augmenting the existing £20,000 ISA annual allowance. The Treasury anticipates that this measure will stimulate economic growth in the UK, incentivise investors, and bolster British businesses.
Speaking on the announcement, Mr. Hunt remarked, “Following a consultation on its implementation, I will introduce a brand-new British ISA, which will allow an additional £5,000 annual investment for investments in UK equity with all the tax advantages of other ISAs.”[3]
Tens of thousands of small businesses to be ‘taken out of paying VAT’
The government announced a tax cut for small businesses in the UK by raising the VAT registration threshold. This means that small businesses with a turnover below £90,000 will not have to register for VAT, which is a tax on goods and services. This change is effective from April 1st 2024. Chancellor Jeremy Hunt stated that this policy aims to reward small businesses for their significant contribution to society and employment.[4]
Government to abolish ‘non-dom’ system
The Chancellor has affirmed the abolishment of the non-domiciled tax status, slated to be replaced by a “modern, simpler, and fairer” system commencing April 2025. Non-domiciled status is currently granted to individuals residing in the UK with specific overseas connections, often hinging on whether their father was born abroad. Under this status, individuals are liable for UK tax on income earned within the country but are exempt from taxes on their global income. After a four-year period, newcomers to the UK will be subject to the same tax regulations as other UK residents.[5]
National insurance to be cut by 2p
National Insurance will undergo a 2p reduction, as confirmed by the Chancellor. Effective from April 6th 2024, the tax rate will decrease from 10% to 8% for employees. Similarly, the self-employed rate will diminish from 8% to 6%. Jeremy Hunt asserts that the average employee stands to gain an additional £450 in their pocket. When coupled with reductions announced in the autumn statement, Chancellor Hunt claims that 27 million individuals will experience an average tax reduction of £900 annually. He empathises that these changes will simplify and improve the fairness of our tax system, ultimately fostering economic growth by incentivising work.[7]
Furthermore, with freezes in the thresholds at which national insurance is paid, the most significant net beneficiaries will be those earning £50,000.[6]
Child Benefit charge threshold raised
Chancellor Jeremy Hunt announced a significant change to the High-Income Child Benefit Charge. Starting in April 2024, the income threshold at which the charge applies will increase by £10,000 to £60,000. Additionally, the taper at which the charge is withdrawn will be raised to £80,000. These changes will benefit an estimated half a million families with children, who will save an average of £1,300 next year. As a result, 170,000 families will no longer be subject to the charge at all.[8]
Freeze on alcohol duty extended
Good news for pubs! Chancellor Jeremy Hunt extended the alcohol duty freeze until February 2025, building on the previous freeze announced in the autumn statement. This means taxes on alcoholic beverages remain unchanged, offering relief to pubs facing rising costs. Hunt estimates this move will benefit 38,000 pubs across the UK, further complementing the 75% business rates discount already in place. “We value our hospitality industry and are backing the Great British pub,” he stated.[9]
Fuel duty freeze extended for 12 months
Chancellor Hunt confirmed extending the existing 5p cut to fuel duty for another year, effectively freezing the tax. This will save the average driver roughly £50 next year and bring total savings to around £250 since the initial cut.
He defended the decision against Labour’s opposition, highlighting the reliance of families and sole traders on their cars and contrasting it with London’s ULEZ plan, which he framed as punitive towards motorists. He emphasised that without the freeze, fuel duty would have increased by 13% this month.[10]
Tax Relief for Buy-to-Let sellers
Chancellor Hunt also announced a Capital Gains Tax (CGT) cut for Buy-to-Let landlords and second-home sellers. Effective from April 6th 2024, the CGT rate for higher-rate taxpayers will be reduced from 28% to 24%. While the basic rate remains at 18%, this move brings property in line with other investments, where higher-rate taxpayers only pay 20%. The Chancellor framed this change as a measure to support the housing market.
Hunt hopes the tax cut will increase housing market activity by incentivising sales, potentially benefiting first-time buyers, while still generating tax revenue for the government.[11]
