Spring Budget Summary 2024
The Spring Budget represented a critical moment for Chancellor Jeremy Hunt and his Government.
With a general election just around the corner, he would have known that his initiatives offered the last chance for him to implement significant economic change and influence his party's electoral prospects later this year.
With this in mind, he set about announcing policies aimed at bolstering both immediate and future economic and personal financial health.
The animated response from all sides of the chamber underscored the significance of the Chancellor's announcements as he delivered his "Budget for long-term growth".
His latest speech detailed important plans in several key areas:
Business tax incentives
Property taxation
Individual taxation
Investments and major business initiatives
Business tax incentives
Past Budgets and Financial Statements have introduced a variety of new incentives and modified existing tax benefits and thresholds for SMEs. However, the tone of the latest speech was notably more restrained.
The increase of the VAT registration threshold to £90,000 will benefit some smaller enterprises, but this adjustment follows a seven-year period of stagnation.
As a result, the positive effects of this increase may be largely negated by inflation over the same timeframe.
The Full Expensing Capital Allowance regime, now made permanent, will be expanded to cover leased asset expenditures "when fiscal conditions permit", offering businesses further means to lower their Corporation Tax liabilities in future.
There were no new adjustments to the R&D tax relief program, though companies are gearing up for the upcoming consolidation of the SME scheme with the R&D expenditure credit (RDEC) scheme starting 1 April this year.
The Chancellor also highlighted the UK's creative sectors, unveiling new tax reliefs valued at £1 billion. Eligible film studios in England are set to benefit from a 40% business rates relief for the next decade.
Furthermore, the rollout of a new UK Independent Film Tax Credit will occur, accompanied by a five per cent rise in the tax credit rate and the removal of the 80% limitation on visual effects expenses in the Audio-Visual Expenditure Credit.
Property taxation
The Chancellor's speech made it evident from the outset that addressing pressing issues in the UK property sector was a priority.
His initial measure was the discontinuation of the Furnished Holiday Lettings (FHL) tax scheme from April 2025, intended to prompt owners of holiday homes to sell and to deter new acquisitions in highly sought locations.
He proceeded to detail adjustments to Capital Gains Tax (CGT) specifically targeting sales of second homes and additional properties by higher and additional rate taxpayers.
The proposal is to lower the CGT rate from 28% to 24% for these individuals while maintaining the lower 18% rate for gains that fall within the basic rate tax band.
This strategy is designed to encourage the sale of such properties, increasing the housing stock available to a wide range of purchasers, including those entering the housing market for the first time, and enhancing revenue projections over time.
Furthermore, from 1 June 2024, the Government intends to abolish Multiple Dwellings Relief, a scheme that offers a discount for the bulk buying of properties under the Stamp Duty Land Tax regime.
Individual taxation
Mr. Hunt's address placed a significant emphasis on the individual taxpayer, dedicating much of his speech to introducing new tax initiatives aimed at increasing the disposable income of working families. To support these measures, the Chancellor made it clear that those more financially capable would need to shoulder the greater burden.
He began by revealing plans to overhaul the existing non-domicile tax rules, shifting to a new residence-based regime starting from 6 April 2025.
This change includes a transitional phase to smoothly transition current non-doms to the new system. Similarly, the Government intends to move Inheritance Tax (IHT) towards a residence-based model, rather than the current domicile based system.
These adjustments, alongside the buffer created by increased Treasury income through fiscal drag, enabled the Chancellor to announce further cuts to National Insurance Contributions (NICs) for both employees and the self-employed.
Effective from 6 April 2024, the main rate of Class 1 employee NICs will be lowered from 10% to 8%. In addition, a further reduction of 2p in the main rate for self-employed National Insurance will be made, building on the 1p cut previously announced in the Autumn Statement. As a result, the main rate of Class 4 NICs for the self-employed will drop from nine per cent to six per cent from 6 April 2024.
The Chancellor also proposed modifications to the High Income Child Benefit Charge, shifting the assessment from the income of the highest earner to total household income. The current threshold of £50,000 will rise to £60,000 from April 2024 as part of the transition to the new approach, and the rate of the charge will be halved, meaning Child Benefit will not be fully repayable until an income of £80,000 is reached.
Investments and major business initiatives
The Chancellor announced a strategy to encourage investment in British companies through the creation of a new 'British ISA', which permits individuals to invest an extra £5,000 each year in UK equities, in addition to the current ISA allowances.
This plan is designed to cultivate a fresh wave of retail investors and establish the UK as a leading centre of global innovation, comparable to Silicon Valley. Hunt is also advocating for amendments to pension fund regulations to mandate the disclosure of investments in UK equities, aiming to boost local investment.
Final reflections
The Spring Budget concentrated significantly on initiatives aimed at benefiting individuals, contrasting with the Autumn Statement, which leaned more towards supporting businesses.
Collectively, these fiscal announcements set the stage for the forthcoming election. Despite criticisms that the Government might be attempting to secure votes through these measures, it's evident that many of them are designed to alleviate the cost-of-living pressures facing taxpayers and to stimulate further economic expansion.
Included in this are additional steps to expand the household support fund, maintain a freeze on alcohol and fuel duties, and implement a one-time adjustment to the rates of Air Passenger Duty (APD) for non-economy passengers.
Speculation is now likely to shift towards the timing of the general election and the economic strategies the opposition will propose.