Chancellor of the Exchequer Jeremy Hunt delivered his key Spring Budget yesterday afternoon ahead of the upcoming general election. He also expressed various findings of the UK's official forecaster, the Office for Budget Responsibility, who predict that the UK economy will grow by 0.8% this year and 1.9% next year. They have also forecast that the UK inflation rate will fall below the target of 2% within “just a few months”.
The finer details of the announcement are outlined below – they will have significant implications for a variety of areas in the UK economy.
Tax and income support
National Insurance
In perhaps the most anticipated update, the Chancellor has reduced the rates of National Insurance paid by employees (Class 1) and by the self-employed (Class 4) by a further 2p in the pound, following the 2p reduction in last year's Autumn Statement. This results in the main rate falling from 10% to 8% for employed individuals and from 8% to 6% for self-employed individuals, saving the average worker around £450 per year.
In addition, the Chancellor announced a long-term ambition to make further cuts to National Insurance in the future, with the aim of removing an additional charge on earned income altogether. While it may seem that this will result in a significant saving for the average taxpayer, the Chancellor has maintained the current income tax bands and personal allowance. As such, the total impact of the change may be less than it initially seems.
"Non-dom” tax regime
There has been speculation in recent weeks that the Chancellor might remodel the “non-dom” tax regime, which is the set of rules surrounding the taxation of individuals who are resident in the UK but who do not consider the UK to be their permanent home. To make the system “fairer and competitive” he announced yesterday that it's to be replaced with a modern residency system.
From April 2025, new arrivals in the UK will not pay tax on foreign income or gains for the first four years. After this period, they will pay tax in the same way as other UK residents, a move which is anticipated to raise £2.7 billion per year. Further changes to the non-dom regime will be implemented, including transitional provisions to deal with the move to the new regime.
British individual savings account (ISA)
The Chancellor intends to introduce a new “British ISA” which will allow savers to invest in UK-listed companies with an increased allowance of £25,000, rather than the current £20,000.
Inheritance tax
A longer-term intention to move inheritance tax to a residence-based regime was also announced.
Current details on this proposal are minimal but it seems that in future, full exposure to UK inheritance tax will apply after 10 years of residence as opposed to the current system under which 15 years of residence are required. A consultation on this announcement is expected shortly.
Child benefits
At present, child benefit is paid to households where the highest earning parent earns up to £50,000. The Chancellor recognised that this does not consider collective household income and says he will consult on implementing long-term changes to allow HMRC to collect household information for this purpose.
It's been some 34 years since the UK last taxed households on a collective basis and so introducing this change may take time. In the short-term, he announced that the threshold for the payment of child benefit will increase to £60,000 and the top of the taper at which it is withdrawn will go up to £80,000 from the current £60,000.
Family debt
There is also set to be significant assistance for families dealing with debt. For those on benefits taking out emergency budgeting loans from the government, the repayment periods will be extended.
The £90 fee required to obtain a debt relief order has also been scrapped and the government fund currently in place for people struggling with the pressures of the cost of living is set to continue for a further six months.
Transport and Energy
The previously announced 5p cut in fuel duty on petrol and diesel was due to end later this month, however, the Chancellor has announced that this will be extended for another year. This is estimated to save the average driver £50 per year.
The so-called “windfall tax” on the profits received by energy companies has been extended to March 2029, rather than the current scheduled date of March 2028.
The air passenger tax which is paid on all flights is also set to increase for business class tickets.
Culture
The freeze on alcohol duty that had been scheduled to end in August has been extended until February 2025. The Chancellor anticipates this will assist the business of more than 38,000 pubs across Britain. There will be an increase in tobacco tax, to continue to maintain the “financial incentive to choose vaping over smoking”. In spite of this, and following extensive consultation, a new tax on vaping products is set to be introduced in October 2026.
The Chancellor recognised the UK's prevalence in the film and television industries and has pledged a new tax credit for independent UK films with a budget of less than £15 million.
The tax reliefs available to touring and orchestral productions will also be made a permanent fixture in recognition of their contribution to British tourism and culture.
Housing
In an effort to increase property transactions, the higher rate of property capital gains tax is to be reduced from 28% to 24%. This was followed by the scrapping of stamp duty land tax relief for people buying more than one dwelling (multiple dwellings relief). The Chancellor considers this relief to be regularly abused so is abolishing the relief entirely. At present this amendment shall only apply to England as both Scotland and Wales operate devolved taxes in this area. It remains to be seen if the devolved administrations will follow suit.
Additionally, the special tax regime for furnished holiday lettings (which can give a favourable tax treatment compared to normal residential letting) will be removed.
Business
The threshold for VAT registration will increase from £85,000 to £90,000.
The Chancellor has said that this will reduce the administrative and financial impact of VAT registration so far as to allow significant assistance to tens of thousands of businesses.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
