Jeremy Hunt presented the much-anticipated budget on March 7th against a backdrop of pressing political concerns and looming elections, prompting significant pressure on the government to address public sentiment.

The flagship initiative was a reduction in National Insurance rates, building upon a previous cut announced in November 2023. Additionally, revisions to child benefit regulations were unveiled, alongside the introduction of a new British ISA allowance aimed at incentivizing investments in UK enterprises.

Key Highlights:

Economic Outlook:

• Inflation, currently at 4%, is forecasted to decline to the Bank of England’s target of 2% within the coming months, surpassing previous estimates.
• Economic growth is predicted to reach 0.8% this year and 1.9% in 2025, surpassing earlier projections.
• Subsequent years are expected to see growth rates of 2%, 1.8%, and 1.7% respectively.
• Although 2022/2023 witnessed the most significant decline in living standards since the 1950s, real household disposable income is anticipated to return to pre-pandemic levels by 2025/2026, outpacing earlier forecasts by two years.
• Tax revenue is set to climb to 37.1% of GDP by 2028/2029, marking the highest level since 1948. Despite efforts to reduce taxes, frozen personal tax thresholds imply increased tax burdens for most individuals in real terms.
• Public spending will grow by 1% in real terms, representing an 8% decrease in real terms since its inception in 2021.
• Borrowing for the current tax year is estimated at £113 billion, £11 billion below the November forecast by the Office for Budget Responsibility.

Taxation:

As of April 2024, the main rate of National Insurance contributions for employees will drop from 10% to 8%, potentially saving around £450 annually for an individual with an average salary of £35,000. This reduction follows a previously announced 2% cut (from 12% to 10%) in November. The non-dom status will be abolished by April 2025, ensuring individuals residing in the UK for over four years pay taxes on worldwide income akin to other residents.

Employment and Benefits:

The threshold for losing Child Benefit will rise from £50,000 to £60,000, with complete benefit loss shifting from £60,000 to £80,000, effective April 2024.
Plans are underway to transition to household income limitations from April 2026.

Investments:

A new ‘British ISA’ scheme is forthcoming, providing investors with an additional £5,000 ISA allowance for British asset investments. Details and timelines are yet to be announced.

Property:

The capital gains tax rate (CGT) on property sales will decrease from 28% to 24%, benefiting landlords and second homeowners. However, tax breaks on short-term lets will diminish with the cessation of the furnished holiday let scheme.

Alcohol, Tobacco, & Fuel:

• Plans for a 3% increase in alcohol duty in 2024 have been abandoned, with rates frozen until February 2025.
• Tobacco duty will rise, and a levy on vape products will commence in October 2026.
• Fuel duty will remain frozen for at least another year, with the previously introduced 5% cut extended.

Public Sector:

• NHS digitization efforts are underway, encompassing AI form-filling and enhancements to the NHS app.
• Military spending is slated to rise from 2% to 2.5% of GDP.

Childcare:

Free childcare hours for children aged 9 months and above will persist for the next two years, albeit nurseries face challenges with escalating costs and limited resources.

In conclusion, the budget primarily favors middle-to-high-income earners and provides minor relief for property owners selling assets. Criticisms of the NI cut center on its selective benefits and the ongoing rise in the overall tax burden due to frozen thresholds, likely to persist until 2028. Concerns also linger regarding spending plans funded partly by increased borrowing, suggesting potential challenges for future governments, especially with Labour maintaining its lead in the polls. For further information on the topics covered, please reach out to a member of our team.

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