In a rather combative presentation, Chancellor Jeremy Hunt delivered what is widely expected to be the last budget statement before the general election. With limited headroom and the now usual trail or announcements in the lead up to his commons speech, there were no big surprises arising from this budget. Even the 2p reduction in the National Insurance contribution paid by employees, which was supposed to be his big curtain call announcement, had already been ‘leaked’ before the budget.
Given that budget statements immediately preceding a budget are usually big show piece events with giveaways, tax breaks and a few surprises; this one was far from routine and ultimately rather lacklustre.
A budget for long term growth
There were some announcements that, if returned to power and given opportunity to deliver on them, would allow the Tories to claim recognition for some significant changes in taxation. But low growth, high inflation and record borrowing mean these are, for now, plans or best intentions. Examples include changes to the High Income Child Benefit Charge (see below) and plans to increase defence spending to 2.5% (currently just over 2%).
The result was a larger number of smaller commitments and funding projects designed to stimulate the economy and productivity. These appear to have been made in the hope that, if he finds himself back at the despatch box as chancellor post-election, he has better growth projections, lower inflation, lower borrowing and therefore a bit more in the kitty to spend.
Here are some of the key announcements:
Sit Rep
- Borrowing – The Chancellor has just about managed to avoid the headline grabbing situation of borrowing being more than GDP, but only just. The Office for Budget Responsibility (OBR) says that it will now peak below its original forecasts of 101% of GDP and will be 94% by 28/29
- Growth – Sluggish growth continues according to OBR forecasts with 0.8% in 24/25, 1.9% in 25/26, 2.2% in 26/27, 1.8% in 27/28 and 1.7% in 28/29.
- Inflation – The chancellor believes we will see inflation back at its target rate of 2% within the coming months.
- Productivity –
- There are 10 million adults of working age, not in work and 900,000 vacancies in the economy
- In the public sector remains 6% below pre-pandemic levels
Taxes
- VAT – The VAT Threshold, the turnover point at which a company must register for VAT will rise from £85,000 to £90,000. This is designed to allow smaller businesses, which wish to remain as such, to remain competitive
- National Insurance – Employees National Insurance will drop by 2p in the £pound from 10% to 8% or 8% to 6% for self-employed. Longer term the Chancellor signalled a wish to remove the double taxation (Income tax and NI) paid by employees on PAYE as their counterparts that pay tax through self-assessment often only end paying Income Tax. The Chancellor made clear he wants to simplify and even up the taxes paid on income for everyone.
- Capital Gains Tax (CGT) – The higher rate band of 28% paid on property sales will reduce to 24%
- Non-Doms – The current system of Non-dom tax will be abolished and replaced with a simplified system whereby they will pay nothing on their incomes for the first 4 years but will then pay the same taxes as UK taxpayers from year 4 onwards
- The furnished holiday lettings regime will be abolished
- Multiple dwelling relief will be abolished
Duty
- Smoking – Excise duty will be payable on vapes and vaping products and tobacco duty will increase in a bid to continue to ween smokers off hard tobacco and either stop completely or move to lower taxed, vaping options
- Fuel duty – The 5p cut will be maintained and duty frozen for another 12 months
- Air passenger duty – for non economy flights, will increase
- Alcohol duty – Remains frozen until Feb 2025
Personal Finances
- Child Benefit – The chancellor said he wanted to end the imbalance of the High Income Child Benefit Charge. He will consult with HMRC on how to make the charge based on combined household incomes rather than the arbitrary income of one or other parent earning £50,000 or more. However, he makes clear this is not straightforward and it is targeting a fundamental change for April 2026. In the meantime, he has increased the threshold from £50,000 to £60,000 and moved the taper (the cut off for receiving any child benefit) to £80,000
- BISA – The chancellor has announced a new British ISA which will give a further £5,000 of tax free allowance above the current £20,000 annual limit for investments specifically supporting the UK’s most promising firms
- Budgeting Advance loans – Households on Universal Credit making use of budgeting advance loans, will now have 24 months to repay them, double the current one-year period
- Debt Relief Orders – The £90 charge for these will be abolished
Other budget announcements
- The government will seek to dispose of its remaining share in NatWest Group, some 15+ years after taking a controlling interest in the, then, Royal Bank of Scotland Group during the financial crash at the end of 2008
- The Chancellor announced a further levelling up fund of £100million – mainly targets, rather unsurprisingly, on former red wall, labour, seats that may be wobbling heading into the next election
- There were plenty of announcements around specific targeted support for Tech, AI, Financial Services, Film & Tv, Life Sciences, Pharmaceuticals & Health and Arts and Culture sectors.
- Full expensing of capital projects for businesses will be extended to leasing – as soon as it is possible and practical to do so
- Dedicated funding to help restore and refurbish village halls, the heart of many communities
- Significant funding will be spent on boosting productivity across the public sector – specifically the NHS, Police service and HMRC (mainly on IT, tech and efficiencies). The NHS productivity plan will be funded in full to create the world’s largest digitally managed health service
- Education – £105million fund for the creation of Special Educational Needs (SEN) free schools
- Oil and Gas – The windfall levy on il and gas profits will be extended to 2029 due to the continuing high market prices for energy
For full, detailed analysis of all the major announcements in today’s budget, our budget review will be posted in our news in the coming days.