Early this week we shared our thoughts on what may be announced in the Spring Budget 2024.
At 12.30 yesterday the Chancellor opened his famous Red Box and revealed his budget. Here is a very quick summary of the main points.
As we believed, tax and income support were high on the agenda.
The issue that will affect most of us is the 2p in the pound National Insurance cut for employees and the self-employed. However, there are a raft of other tax-related items in the budget including:
- Full child benefit will now be paid to households in which the highest-earning parent earns up to £60,000 (an increase on the existing £50,000 limit). In addition, child benefit will be paid in part if the highest earner earns up to £80,000.
- A £5,000 "British ISA" tax allowance to be introduced after consultation to allow individual savers to invest in UK-listed companies.
- The Government has extended access to their fund for people struggling with the cost of living crisis by six months and those on benefits taking out emergency government budgeting loans will now have longer to repay their loans.
The Chancellor also said the current tax rules regarding non-domiciles (temporary UK residents whose permanent home is overseas) will be updated in April 2025.
There was also good news for small businesses. The point at which they must register for VAT will increase from £85,000 to £90,000 from April and the deadline for repaying the government's Covid loans for small businesses has been extended until March 2026.
The government also gave a nod to the importance of the UK's entertainment industry. They have made the current tax reliefs for touring and orchestral productions permanent and introduced a new tax credit for independent UK films with a budget of less than £15m.
Housing and property were widely believed to be a central point for the Spring Budget 2024, particularly given the likelihood this budget will be a precursor to the announcement of the next General Election.
As we reported last week, many felt this could come in the form of a further extension to the current Stamp Duty Land Tax regime, the launch of a 99% government guarantee mortgage or the reintroduction of the pervious 'Help to Buy' scheme.
However, what transpired was that the higher rate of Capital Gains Tax on residential property sales' profits will be cut from 28% to 24% and the tax breaks on the short-term rental of holiday properties will be scrapped to encourage landlords to move into long-term lets while demand continues to strip stock and the opposition to the 'AirBnB economy' continues to grow in the UK's most popular tourist areas. In addition, a Stamp Duty Land Tax relief reducing the cost of buying multiple residential properties will end.
As we predicted, fuel duty has been frozen again. The 5p cut in fuel duty on petrol and diesel will be extended for another year after 31 March 2024. Air fares have also been impacted at the top end with increased Air Passenger Duty on business class fares.
We also mentioned the potential 'vaping products levy'. This has been announced but will not come in until October 2026.
In addition, the government has also frozen alcohol duty until February 2025 (rather than increasing it this August as initially planned) and announced it will increase existing taxes on tobacco to give people a "financial incentive to choose vaping over smoking", the logic of which could be questioned given their long term plan to put increased levies on vape products.
Finally, from a more cultural perspective, the Chancellor also announced he has pledged £1m to build a memorial to honour Muslims who fought during World Wars One and Two.
What effect will the Spring Budget 2024 have on the economy?
As is tradition, the Chancellor's budget was accompanied by a statement from the Office for Budget Responsibility. They predict the UK economy will grow by 0.8% this year, and between 1.7% and 2% each year from 2025 to 2028.
They also believe the UK's underlying debt (not including Bank of England debt) will be an eye-watering 91.7% of GDP by the end of 2024 and 92.8% of GDP by the end of 2025.
More immediately, they feel the UK's inflation rate forecast will fall below its 2% target "in just a few months' time" (mainly due to the easing in fuel and food prices).
If you would like to discuss how any aspect of the Spring Budget 2024 could impact you or your business, please contact us today.