Sweetening a pre-election public
In this summary, we’ve explained the key developments and changes from the Chancellor’s Budget announcement on 6 March 2024. For a pdf version of our full March 2024 Budget Summary click the green download pdf button on the right.
- Background To The Budget
- Download Our Full Summary of The Budget
- Key Highlights From The Budget
- Final Thoughts – Can We Help?
Background To The Budget
Historically, pre-election Budgets prompt a degree of excitement as Chancellors endeavour to entice voters with a crowd-pleasing range of tax-cuts or threshold-expanding measures
Back in his Autumn Statement, Chancellor Jeremy Hunt alluded to the possibility that this March Budget would be no exception. However, data at the start of 2024 made him adopt a more cautious fiscal tone, despite the Conservatives significantly trailing Labour in the polls.
Sluggish growth
The UK economy has yet to make the hoped-for growth strides. At the end of January, the International Monetary Fund downgraded its forecasts for UK growth in 2025 from 2% to 1.5%.
At the start of February, the Bank of England held the base rate at 5.25%, acknowledging inflation is still some way off its 2% target. There were however suggestions that the base rate had peaked, but we’ll have to wait until the next Monetary Policy Committee gathering on 21 March for confirmation.
Many forecasters agree though that the inflation and base rate decline will not be smooth and steady across 2024.
A difficult balancing act
Financing tax cuts means something else in the Treasury coffers has to give. In late January, The Institute for Fiscal Studies indicated that the next government would need an extra £20 billion to maintain spending levels in public services. It echoed the IMF in advising that tax cuts will have to wait until the national debt is on a firmer downward track.
For individuals, the overall UK tax burden remains at a record high. Frozen tax thresholds have dragged many into higher tax rates. This, along with prolonged higher mortgage rates since 2022 and still challenging living costs, leaves a bitter taste with potential voters.
For businesses, it was concerning to learn recently that the UK had slipped into a recession at the end of 2023. Many sectors, including retail, hospitality and construction, are continuing to struggle.
How many ‘sweet treats’ could be spared?
So, the backdrop to this Budget was a challenging one for the Chancellor. Lightening the tax burden to woo voters while reducing the national debt and growing the economy are impossible to accomplish collectively in the short term.
With time running out ahead of the election, all eyes were on the Chancellor’s red dispatch box to see just how many ‘sweet treats’ it contained. In our Budget Summary, we have given both overviews and detailed information for personal, business and property-related taxes.
Key highlights from the March 2024 Budget
- The main rate of class 1 employee national insurance contributions (NICs) will be cut from 10% to 8% with effect from 6 April 2024.
- The main rate of class 4 self-employed NICs will be reduced from 8% to 6% with effect from 6 April 2024.
- The high income child benefit charge (HICBC) will be reformed, increasing the HICBC threshold to £60,000 from April 2024. The rate at which HICBC is charged will be halved so that child benefit is not fully withdrawn until individuals have an income of at least £80,000. The government will consult on moving the HICBC to a household rather than an individual basis by April 2026.
- An additional UK individual savings account (ISA) will be created with a £5,000 allowance in addition to the current £20,000 ISA limit.
- The higher rate of capital gains tax (CGT) for residential property disposals will be cut from 28% to 24% from 6 April 2024. All other rates will remain unchanged.
- The furnished holiday lettings tax regime will be abolished from 6 April 2025.
- The value added tax (VAT) registration threshold will rise from £85,000 to £90,000 from 1 April 2024. The deregistration threshold will rise from £83,000 to £88,000.
- A UK independent film tax credit will be introduced at a rate of 53% on qualifying film production expenditure.
- The non-UK domicile rules will be replaced, from 6 April 2025, with a regime based on residence.
Final thoughts
As The Treasury releases more details from the Budget announcements, we will assess the implications for our clients. We will share our conclusions and advice on our website, in our Shipshape magazines, our Tax Facts card and in our conversations with clients.
In the meantime, if you wish to discuss how this Budget impacts you, please do talk with your usual Shipleys’ contact. Our key focus remains to help our clients navigate the changes smoothly and comfortably.
This Budget Summary is based on the Chancellor’s Budget Statement on 6 March 2024, supplemented by information from official publications.
It reflects our understanding of proposed changes to tax law and practice at the date of publication but is not a complete and definitive guide. The Budget proposals may be amended before the Finance Bill becomes law.
Specific advice should therefore be obtained before taking action, or refraining from taking action, on the basis of this information.
© 2024 Shipleys LLP
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