In a pivotal move set against a backdrop of economic recalibration, Chancellor Jeremy Hunt unveiled a series of transformative measures in the 2024 Spring Budget. These initiatives, strategically crafted amidst a turbulent economic forecast, aim to bolster national insurance cuts, introduce a significant VAT threshold adjustment, and reform the high-income child benefit charge, underscoring the government’s commitment to fostering a robust economic environment.
A New Era for National Insurance
With the general election on the horizon, Chancellor Hunt announced a further 2% cut to national insurance, a strategic decision poised to invigorate the labour market. This reduction lowers the main rate of employee national insurance from 10% to 8%, and self-employed contributions from 8% to 6%, marking a pivotal shift towards enhancing disposable incomes and promoting workforce participation.
Revamping the VAT Landscape
For the first time in seven years, the VAT threshold has been raised from £85,000 to £90,000, effective from 1 April. This adjustment is set to exempt tens of thousands of businesses from the VAT ambit, thereby stimulating investment and growth in a crucial move to uplift the business sector.
Targeted Reforms: FHL and HICBC
The Budget heralds the abolition of the furnished holiday lettings (FHL) regime and the non-dom tax status, alongside a reform aimed at the high-income child benefit charge (HICBC). These measures are designed to rectify distortions and inequities within the current tax system, facilitating a fairer and more balanced fiscal environment.
FHL and Property Taxes
The FHL’s abolition addresses housing shortages in coastal areas by discouraging the conversion of long-term rentals into holiday lets. This move, coupled with adjustments in property taxation such as the abolition of multiple dwellings relief on Stamp Duty Land Tax (SDLT) and a reduction in the higher rate of capital gains tax (CGT) on property sales from 28% to 24%, signals a profound shift in property tax policy.
Non-dom Status and HICBC
The non-dom tax status’s elimination aims to establish a fairer tax regime, while the proposed reforms to the HICBC, set to transition to a household-based system by April 2026, demonstrate a concerted effort to address systemic unfairness within the tax system.
Business Investment and Economic Outlook
Chancellor Hunt’s Budget also focuses on business investment, extending the recovery loan scheme and enhancing access to finance for SMEs. Amid economic challenges, the latest forecasts from the Office for Budget Responsibility (OBR) indicate an economy poised for growth, with inflation expected to fall below the 2% target ahead of schedule.
A Budget for Growth and Fairness?
The 2024 Spring Budget sets a course towards economic resilience, equitable tax reforms, and strategic investments. As the UK navigates towards a post-pandemic recovery, these measures reflect a comprehensive approach to stimulating economic growth, enhancing living standards, and ensuring long-term fiscal sustainability.
