Jeremy Hunt’s Spring Budget: Tax Cuts and New ISAs
Chancellor Jeremy Hunt unveils a Spring Budget with major tax cuts and economic reforms ahead of the upcoming general election.
In a strategic move ahead of the imminent general election, Chancellor Jeremy Hunt has unveiled a comprehensive Spring Budget that brings into focus a series of tax adjustments aimed at bolstering the UK economy.
Among the highlighted reforms are significant reductions in National Insurance contributions, a continuation of the freeze on fuel duty, modifications to child benefit allocations, and the introduction of a novel British ISA, among other pivotal changes.
National Insurance cut
In an ambitious bid to stimulate economic growth and provide financial relief, the Chancellor has announced a notable cut in National Insurance rates, which, when amalgamated with a previous reduction, is poised to deliver a substantial saving of £900 for the average worker.
Specifically, the rate for employees is to be lowered from 10% to 8%, and for the self-employed, a decrease from 8% to 6% is anticipated.
Hunt said, “It means an additional £450 a year for the average employee or £350 for someone self-employed,” underscoring the move’s potential to simplify the tax system and incentivise work across the board.
British ISA unveiled
A notable addition to the fiscal landscape is the unveiling of the British ISA, designed to encourage investments in UK assets. With an extra £5,000 allowance atop the existing £20,000 ISA limit, this move is hailed by some experts as a prudent strategy to foster domestic market growth without impeding existing investment plans.
Despite potential concerns about the FTSE’s performance, this initiative offers investors an expanded avenue for portfolio diversification.
Non-dom tax regime overhauled
In a groundbreaking shift, Hunt announced the abolition of the non-dom tax status, aiming to modernise and simplify residency taxes and forecast to raise £2.7 billion annually. This reform is set to limit tax exemptions for new arrivals to a four-year period, with a transitional phase for current non-dom residents.
Inheritance tax unchanged
Despite speculation beforehand, there were no modifications to the inheritance tax thresholds, leaving them unchanged, highlighting a focus on targeted financial relief and economic stimulation across other sectors.
Capital Gains Tax on property falls for higher-rate taxpayers
Currently, higher-rate taxpayers that sell a property are liable to pay 28% of profits above the £6,000 threshold in capital gains tax. The chancellor announced that this amount will fall from 28% to 24% from April 6. The threshold, however, is also set to fall to £3,000 in the new tax year.
Pension triple lock to stay
The Government confirmed it is committed to supporting pensioner incomes by maintaining the triple lock. In 2024/25, the full yearly amount of the basic state pension will be £3,700 higher, in cash terms, than in 2010. It said that’s £990 more than if it had been uprated by prices, and £1,000 more than if it had been uprated by earnings (since 2010).
Pension pot for life
The Government said it will continue to explore how savers could be allowed to take their pension pots with them when they change job, an idea originally floated in the Autumn Statement
Natwest retail share offer confirmed
As part of the Government’s plan to return NatWest to private ownership by 2025/26, it confirmed that it has generated over £5.2bn of proceeds since launch, and reduced its shareholding to below 33% on 23 February 2024. In total, the Government has raised over £14.5bn of proceeds from sales of the NatWest shareholding to date.
It also confirmed that it intends to sell part of its remaining NatWest shareholding to retail investors this summer at the earliest “subject to supportive market conditions and achieving value for money for the taxpayer.”
Child benefit high income charge reformed
Child benefit reforms see an increase in the threshold for the high-income child benefit charge, with plans to transition towards a household-based assessment system by April 2026, broadening eligibility and enhancing fairness.
Stamp Duty relief for Multiple Dwellings axed
Addressing concerns surrounding the exploitation of stamp duty reliefs, particularly the Multiple Dwellings Relief intended for the private rented sector, Hunt has resolved to abolish this relief, citing its recurrent misuse and lack of evidence supporting its effectiveness in stimulating investment.
VAT threshold for Small Businesses raised
The threshold at which small businesses must register to pay VAT will be raised from £85,000 to £90,000 from April. Hunt said this would support small businesses and help them grow.
Whilst any increase is good news, it has been pointed out that this does not keep up with inflationary pressures. However, supporting Budget documents suggested over 28,000 businesses will benefit in 2024/25 from no longer being VAT registered.
Vaping and smoking
The Budget introduces a targeted approach towards vaping, with planned increases in taxes on vapes and e-liquids set for October 2026. This measure, coupled with a one-off hike in tobacco duty, seeks to deter non-smokers from vaping while maintaining a financial incentive for smokers to switch to vaping.
Alcohol and Fuel Duty frozen
A freeze on alcohol duty, which had been due to end in August, will continue until February 2025. The government said this would result in 2p less duty on an average pint of beer, 1p less duty on a pint of cider, 10p less duty on a bottle of wine, and 33p less duty on a bottle of spirits, than if the planned duty increase had gone ahead.
Fuel duty has once again been maintained at its current rate, with an extension of the 5p cut for an additional year, marking a consistent freeze for the 14th consecutive year. This extension is forecasted to save the average car driver £50 in the forthcoming year.
Other news
The Spring Budget also sees adjustments in air passenger duty for non-economy tickets to reflect inflation while maintaining the rate for economy travellers and extends the household support fund for an additional six months to assist families in need.
Furthermore, in a move to prioritise long-term tenancies, tax benefits for short-term holiday lettings are set to be phased out, addressing the surge in short-term rentals and its impact on the housing market.
Summary
Chancellor Jeremy Hunt’s Spring Budget articulates a clear strategy to invigorate the UK economy through targeted tax cuts, incentives for investment, and regulatory reforms, setting a course for growth and financial stability in the lead-up to the national election.
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