by Sharon Bedford
Partner
6 March 2024
Press Releasesby Sharon Bedford
Partner
The Chancellor of the Exchequer, Jeremy Hunt, today announced stronger growth predictions from the Office of Budget Responsibility, (0.8% this year up from its previous prediction of 0.7% and the 2025 forecast raised to 1.9% from 1.4%), giving Jeremy Hunt the wiggle room to deliver a “Budget for Longer Term Growth” with a focus on “Making Work Pay”.
The headline announcement was a “tax cut” for 27 million working people, reducing Employees NI to 8%, (from 10%). Following on from the previous 2% reduction announced in the Autumn Statement last year, this delivers a total of £900 a year saving for someone on an average salary.
A similar 2% NI cut was announced for the self-employed, reducing the rate to 6%.
By choosing to cut NI rather than income tax, the Chancellor has chosen to concentrate the savings on those who derive income from work, rather than from other sources, e.g. savings.
Businesses that employ workers may be a little disappointed that there was no commensurate reduction in the rate of Employers NI - which remains at 13.8%.
There was very little announced for businesses in the speech, although the VAT registration threshold increase (from £85,000 to £90,000) will be welcome to 28,000 small businesses who will benefit from paying VAT altogether.
There was some targeted good news for businesses in certain sectors, with new or enhanced tax reliefs in high growth industries, such as creative industries, advanced manufacturing and life sciences.
It might also be expected that the commitment to spend £4.2 billion within the public services to invest in new technologies like AI and updated IT systems, might have beneficial repercussions for technology businesses who can support these digitalizing initiatives.
Helpfully there were no new announcements to R&D tax credit reliefs – although it is worth remembering that significant changes – including a merged scheme – start in April this year.
There are mixed news for property investors. Although the rate of CGT on second properties will be cut from 28% to 24% from April 2024, the favorable tax benefits associated with the furnished holiday lets regime will be abolished from April 2025.
The High-Income Child Benefit Charge will be assessed on a household-basis going forward, but as it is acknowledged this information will not be easy to collect, this will not be effective until April 2026. In the meantime, the threshold has been increased to £60,000 and by halving the rate at which Child Benefit is repaid – there will be a £1,260 boost on average for around half a million working families.
In a move to make the tax system ‘fairer’ the government has announced it will scrap and reform the tax break for wealthy foreign residents in the UK who have non-domiciled tax status. This will be replaced with a "modern residency system", which will be designed to allow the UK to remain competitive and still attract foreign nationals. Although full details are yet known, there will undoubtedly be a transitional period which may deliver tax planning opportunities.
Contrary to earlier speculations, there was no mention of significant changes to Inheritance Tax.
A new vape levy and one-off increase in tobacco duty.
Air passenger duty increased for business class travelers; Hunt announces.
The freeze in alcohol duty was due to end in August but has been extended to February next year.
Fuel duty to remain at current rate and frozen for the next 12 months.
Sharon Bedford, Business Tax Partner, comments: “The personal tax cuts - worth £20 billion when combined with those announced last Autumn – are said to reduce the effective personal tax rate for a median earner to its lowest level since 1975. These are no doubt aimed at helping families to cope with the pain from the cost-of-living crisis and will be welcomed by many.
“Businesses – especially those in the owner-managed sector - however may have hoped that more had been done to help them with some of the challenges they also face.
“As this may be the last budget before the next general election, Jeremy Hunt will no doubt have been hoping to encourage Conservative voters. The jury must be out on whether he has been successful.”
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