Our initial thoughts on the Spring Budget

March 6, 2024

Chancellor Jeremy Hunt has delivered his much anticipated Spring Budget today, with the promise of helping families through ‘permanent cuts in taxation’. Here, our Director and head of tax, Kirk Vaughan goes through his initial response to today’s announcements.

“With high levels of inflation, the cost of living crisis and tax rates already at a high, the Chancellor was under pressure to deliver some good news with a reduction in taxation at today’s Spring Budget, especially with the general election just round the corner.  Whilst several tax reductions were announced, I question how much of an impact they will actually make to our clients.

Looking at the changes to personal tax, individuals will benefit from a further reduction in National Insurance, with the main rate of employee’s National Insurance being cut from 10% to 8%. This will result in a tax saving of up to £754 for those earning £50k pa or more. The Self-Employed will also benefit with Class 4 National Insurance rates reducing from 8% to 6%, which equates to a similar saving. These reductions are in addition to the existing cuts made in the Autumn Budget. Although this is positive news, with the tax free Personal Allowance (PA) and Higher Rate Threshold (HRT) being frozen in the 2022 budget until 2028, in real terms most will see little (if any) increase in their take home pay.

The Chancellor rightfully acknowledged the unfairness in the current Child Benefit system, where a household with one income of £60k would lose all of their Child Benefit entitlements, however a household with 2 incomes of £49k, totalling £98k would still receive full benefit. The Chancellor has pledged to consult on a new household-based system which will come into place in 2026. For now, the point where taxpayers start to lose Child Benefits has been raised from £50k to £60k,  with the point at which all Child Benefits are lost increasing from £60k to £80k. This is a positive step for working families and I look forward to seeing how this will look under a household income regime.

The higher rate of Capital Gains Tax (CGT) on residential properties has been cut from 28% to 24%, which seems significant until you take into account that the CGT exemption was halved to £6,000 in 2023/24, and will be halved again to £3,000 in 2024/25. As a result, some may still be paying more tax on the sale of properties, despite the lower tax rate.

Multiple Dwellings Relief from Stamp Duty Land Tax has been abolished as research found there was no direct benefit to those it was intended for. This measure will take place from June 2024. In other property related measures, furnished holiday let reliefs have also been abolished with the intention to provide a better economy for longer stay lets within local communities. These changes apply from April 2025 so those with furnished holiday lets have some time to prepare for these changes.

One of the biggest announcements of the budget was the abolition of the Non-Domiciled Residents (non-doms) status, which allows foreign nationals to avoid paying UK tax on overseas income. New measures will be brought into place, and we hope to see more detail on this in the coming days.

For businesses, we have seen the VAT registration threshold increase from £85k to £90k. Whilst this will benefit a number of small businesses, I do not believe this goes far enough. The previous limit has been in place since 2017 and inflation over this period far outweighs this modest increase.

Fuel duty has been frozen for a further twelve months, with the 5p cut remaining in place until March 2025. It is estimated that this will save the average driver £50 per year. Whilst this is another welcome measure, many will argue it does not go far enough, especially businesses with significant fuel costs such as hauliers who are already struggling with rising fuel costs caused by the increase in oil prices.

Altogether, there were no major surprises from today’s budget. Whilst I am pleased to see a number of tax reductions announced, I don’t feel they go far enough to help individuals and businesses in today’s economic climate. The reality is most of the tax reductions are offset against other changes made in recent times such as the freezing of allowances meaning any real terms saving is minimal. Further changes have also been announced for the future, such as an extension of the full expensing rules to leased assets which will help some businesses, however whether these changes will go ahead will depend on the conservatives remaining in power following the next election.”

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