Welcome to Accountant Services summary of Jeremy Hunt’s 2024 Budget.
Jeremy Hunt sought to turn around Conservative electoral fortunes today as he placed tax cuts for workers and parents at the heart of his Budget.
As his centrepiece, the Chancellor announced a 2percent cut to the rate of National Insurance paid by employees.
This will save the average worker an estimated £450 a year, rising to £900 when combined with a similar reduction announced last autumn.
The tax cut will be paid for through a mix of tax increases elsewhere, on business class airfares, owners of short-term holiday lets, vapes and tobacco.
However, other taxes have been frozen including fuel duty and alcohol duty, while the threshold at which parents are excluded from receiving child benefit has been raised.
New “British ISAs” are also to provide an extra £5,000 tax-free allowance for savings invested in UK firms.
Meanwhile embattled landlords received a boost with news that the higher rate of capital gains tax is to be cut from 28 percent to 24 percent on residential property.
Tax cuts:
• National Insurance cut by 2 percent
• Child benefit threshold raised from £50,000 to £60,000
• Capital gains tax on property cut
• Tax relief for savers in new ‘British Isa’
• Fuel duty frozen
• Alcohol duty frozen
• More ‘expensing’ relief for businesses
• Tax rises
• Tax perks for holiday lets scrapped
• Stamp duty raid on multiple purchases
• Non-doms stung in tax raid
• Vapes and tobacco to be hit by duties from October 2026
• Business class airfares hit with higher duty
• Oil and gas windfall tax extended
• Inflation, debt and the economy
Mr Hunt said inflation will finally drop below the 2 percent target “in just a few months’ time”, according to the latest forecast by the Office for Budget Responsibility. That is nearly a year earlier than previously forecast, he says.
When Rishi Sunak became PM, inflation stood at 11 percent and now it is 4 percent.
Meanwhile, he said the OBR now says debt as a share of GDP – which was set to exceed 100 percent; is now forecast to fall each year until it reaches 94.3 percent in 2028-29.
On the economy, the Chancellor said the OBR now predicts growth of 0.8 percent this year and 1.9 percent next year. That is 0.5 percent more than an earlier forecast.
In the following years, growth is expected to rise by 2 percent, 1.8 percent, and 1.7 percent in 2028.
“Because we have turned the corner on inflation, we will soon turn the corner on growth,” Mr Hunt told MPs.
National Insurance tax cuts
National Insurance on employee wages will be cut by 2 pence in the pound from April 6, the Chancellor announced.
An equivalent cut was also announced for the self-employed.
Mr Hunt said this will hand an extra £450 a year to the average employee or £350 to someone who is self-employed.
Added to an NI cut last autumn, it amounts to a tax cut of £900 a year.
Child benefits
Tens of thousands of families will be able to claim more child benefit from this year.
From April, the Chancellor said the level of income at which a parent starts to lose child benefit entitlements will rise from £50,000 to £60,000.
The top of the taper will also increase to £80,000, making the rate at which the benefit recedes slower. It will mean 170,000 more families will now gain the full benefit, Mr Hunt said.
Capital gains tax
The higher rate of capital gains tax on residential property is to be cut from 28 percent to 24 percent, in a boost to landlords.
Mr Hunt said the Treasury and the OBR agreed that the move would actually increase tax revenues overall, as it would encourage more property sales.
The net extra tax take from the change is expected to be £690m, according to Budget papers.
Fuel duty
Fuel duty is to be frozen for the 14th year running, giving motorists a £6bn tax break.
Treasury officials had been pushing Mr Hunt to raise fuel duty by at least 2 pence.
But the Chancellor said he will maintain a 5 pence temporary cut and freeze fuel duty for a further 12 months, saving the typical motorist £50 next year.
Fuel duty was last raised in 2011 and accounts for £26.2bn in tax revenues – around 2.7 percent of Treasury receipts.
The extended relief will result in £6.4bn of lost tax income, Budget documents say.
Alcohol duty freeze
The Chancellor has confirmed the alcohol duty freeze has been extended to February 2025, in a boost to drinkers.
It had been due to go up by 3 percent.
Mr Hunt said the move will benefit 38,000 pubs across the UK, adding: “We value our hospitality industry and we are backing the great British pub.”
The freeze will cost the Treasury an estimated £1.7bn, according to official forecasts.
Holiday lets
Tax perks for holiday let owners have been scrapped in a £600m raid on landlords.
The Chancellor claimed the current rules are “creating a distortion” that is meaning too few properties are available for local people.
From April 2025, he said relief for furnished holiday lets would end.
Air passenger duty
Mr Hunt said air passenger duty charged on non-economy airfares – or business class tickets – will be increased to account for inflation.
The rate for economy travellers will remain frozen. Overall the Treasury forecasts the change will raise £500m in the next five years.
Non-dom tax raid
The ‘non-dom’ tax regime is to be scrapped and replaced in a measure to raise £2.7bn a year, Mr Hunt said.
Non-domicile status allows foreign nationals who live in the UK but are officially domiciled overseas to avoid paying UK tax on any overseas income or capital gains for their first seven years in the country.
But from April 2025, Mr Hunt, new arrivals to the UK will not have to pay tax on foreign income and gains for the first four years of their UK residency.
After that, they will pay the same tax as other UK residents. Transition arrangements will be allowed for current non-doms.
North Sea windfall tax
The end of the windfall tax on North Sea oil and gas firms – known officially as the “Energy Profits Levy” – has been extended by one year, to 2029.
Mr Hunt said the raid will raise an extra £1.5bn for Treasury coffers.
Stamp duty relief axed
Stamp duty relief for people who purchase more than one dwelling in a single transaction, known as Multiple Dwellings Relief, has been axed.
Mr Hunt said the measure was originally meant to support investment in the private rented sector but had failed to do so and was “being regularly abused”.
The raid on landlords will raise an estimated £1.3bn.
Vape and tobacco duties
To discourage non-smokers from taking up vaping, Mr Hunt announced a new excise duty on vaping products that will come into force from October 2026.
At the same time, he said there will also be a one-off increase in tobacco duty “to maintain the financial incentive to choose vaping over smoking”.
Treasury documents show the vaping duty is expected to raise £875m up to 2029, while the change to tobacco duty will raise £450m.
‘British ISA’
Mr Hunt promised a new ‘British ISA’ which will provide another £5,000 of annual tax-free investment in UK equities.
He said this will “ensure that British savers can benefit from the growth of the most promising UK businesses” while supporting those firms to expand.
Business tax cuts
Mr Hunt noted that in his Autumn Statement he unveiled a £10bn tax cut for business that make capital investments in the UK, known as “full expensing”.
Now, following calls from business lobbying groups, he announced firms will be able to claim tax relief for leased assets as well.
In addition to business rates support, the Chancellor said a further £200m will be provided to the post-pandemic Recovery Loan Scheme which lends money to small businesses to boost growth.
Over in the creative industries, the Chancellor said he will give film studios in England 40 percent relief on their gross business rates until 2034.
He also unveiled plans for a new tax credit for independent films with budgets of less than £15m.
Nuclear and green energy
Mr Hunt has confirmed that the Government has reached a £160m deal with Japanese giant Hitachi to buy the Wylfa nuclear site on Anglesey, as well as the Oldbury site in South Gloucestershire.
Wylfa and Oldbury have both been mooted as potential site for large-scale or smaller, modular nuclear reactors in future.
He also says Great British Nuclear, the public body set up to prepare the ground for new power stations, is about to begin the next phase of a process to select which mini-nuclear power station designs will be backed by the Government.
Science, industry and devolution
Construction of nearly 8,000 homes will be supported by £242m of investment in Barking Riverside and Canary Wharf, London, the Chancellor says.
The money will also help transform Canary Wharf into “a new hub for life science companies”, with efforts underway to convert office space into laboratories.
Mr Hunt also announces a “North-East trailblazer devolution deal” worth £100m and plans to devolve more powers to Buckinghamshire, Warwickshire and Surrey.
NHS and public spending
In addition to increasing certain taxes, it was thought Mr Hunt might seek to fund his Budget measures by constraining post-election public spending even more than previously planned.
He instead announced spending in public services will rise by 1 percent in real terms over the next parliament, as planned.
But Mr Hunt added the Government will “spend it better”, as he unveiled plans to boost public sector productivity.
For example, he said, the Treasury has agreed to fund a £3.4bn upgrade of NHS computer systems “in full” to unlock £35bn of potential savings.
A further £2.5bn is being invested to meet “pressures in the coming year”.
However, he also faces pressure to ramp up spending in defence. In his speech, Mr Hunt says defence spending will rise to 2.5 percent of GDP “as soon as economic conditions allow” without making a concrete commitment.
Whatever the case, the Chancellor must meet a self-imposed rule of having debt falling as a share of gross domestic product (GDP) by 2029.
