Today’s Budget was delivered following a difficult few years, with the British economy experiencing a series of unprecedented shocks, including the legacy of Covid-19, President Putin’s war in Ukraine and the ongoing conflict in the Middle East. I know that this has made life challenging for local residents.
To help stabilise the economy, since the beginning of 2023, the Government has been working to halve inflation, grow the economy and reduce debt. I am pleased that good progress has been made, with:
- inflation having fallen from 11.1% to 4.0% and expected to reach the Government’s 2% target by next quarter – one year sooner than expected by the OBR;
- headline debt falling from 98.8% of GDP in 2024-25 to 94.3% of GDP at the end of the forecast; and
- confirmation from the OBR that the economy grew last year and is set to be bigger at the end of the forecast than previously thought.
However, rightly, the Government has acknowledged that there is still work to be done and the announcements today build on the Government’s work to deliver a brighter future for the UK, with long-term economic security and opportunity.
I hope that the following summary of the Chancellor's key announcements is helpful.
Cutting Taxes and Rewarding Hard Work
- National Insurance Contributions will be cut by a further 2p from 10% to 8% for employees. Coupled with the cuts announced at the Autumn Statement, this will save the average worker £900.
- Class 4 National Insurance Contributions will be cut by a further 2p from 9% to 6% for those who are self-employed. Coupled with the cuts announced at the Autumn Statement, this will save the average self-employed person £650.
Supporting Parents
- The threshold for the High-Income Child Benefit Charge will be raised from £50,000 to £60,000 and the rate halved so that it is not paid in full until a family earns over £80,000. This will mean that 170,000 families will no longer pay the High-Income Child Benefit Charge, and support half a million families with an average gain of up to £1,260 towards the costs of raising children.
- The Child Benefit system will be reformed so that it is based on household rather than individual incomes by April 2026. Currently, two parents earning £49,000 a year receive full Child Benefit, while a household with a single earner on £50,000 starts to lose their Child Benefit. The Government will hold a consultation on this reform in due course.
Helping with the Cost of Living
- The 5p cut to fuel duty will be maintained and rates frozen for the 14th consecutive year. This will save the average car driver around £50 this year.
- The alcohol duty freeze will be extended to alleviate pressure on the hospitality sector. This will mean duty is 2p lower on a pint of beer and 10p lower on an average bottle of wine.
- The Household Support Fund will be extended from April to September 2024, supported by an additional £500 million. This fund provides targeted support for the most vulnerable, helping them with the cost of essentials such as food and utilities.
- The Energy Profits Levy will be extended until 2029 and legislation will be introduced to ensure it disapplies when energy prices return to normal.
Boosting Public Sector Productivity
- Waste and inefficiency in the public sector will be reduced under the Public Sector Productivity Reform Programme. The next steps of this programme will be backed by £4.2 billion to deliver reform and long-term savings. This includes:
- An additional £3.4 billion for the NHS over three years to boost productivity with improved technology and more efficient ways of working. This will help overhaul the way the NHS works, reducing administrative burdens, freeing up doctors and nurses to focus on treating patients and unlocking £35 billion of cumulative productivity savings by 2030.
- £800 million to make £1.8 billion of further productivity savings from other public services. This includes saving up to 55,000 hours a year of admin time in the justice system, creating new children’s social care places to reduce costs for local authorities, and saving £100 million for the public purse by reducing fraud through expanding the use of AI to catch fraudsters.
Supporting the NHS
- An additional £2.45 billion will be invested next year to make progress on getting waiting lists down, boost everyday services and improve maternity care. This will mean that NHS funding grows in real terms from 2023-24 to 2024-25.
Backing British Businesses and Growing the Economy
- Draft legislation will be introduced to extend full expensing to leased assets. This builds on the announcement at the Autumn Statement that full expensing will be made permanent, which represents a £10 billion tax cut for businesses and gives the UK the most attractive investment tax regime of any large European or G7 country.
- The VAT registration threshold for small businesses will be increased from £85,000 to £90,000 to allow them to focus on their priorities like recruiting new staff and helping grow the economy. This will mean the UK’s VAT registration threshold will be the highest across the EU and the highest in the OECD alongside Switzerland. I am pleased that the Chancellor referred to my campaign for this in his speech.
- A new UK Individual Savings Account (ISA) will be launched, with a £5,000 allowance, to promote investment in UK assets and funds. This will create a tax-free investment opportunity for savers to invest specifically in UK assets.
Reforming Taxes
- Non-Domiciled (Non-Dom) status will be abolished and replaced with a simpler residency-based system. Under the new system, from April 2025, anyone who has been tax resident in the UK for more than 4 years will pay UK tax on any foreign income and gains, as is the case for all other UK residents. Transitional arrangements will apply.
- A new duty on vaping products will be introduced from 2026 to help reduce the number of people hooked on nicotine. The introduction of duty will also raise revenue to fund vital public services such as the NHS and stop-smoking initiatives, supporting a smokefree generation.
- Capital Gains Tax (CGT) on property sales will be cut. From 6th April 2024, the higher rate of CGT on residential property will be cut from 28% to 24% on disposals of buy-to-lets and second homes. The lower rate of 18% will continue to apply for gains that fall within an individual's basic rate band. This will support those who want to sell their property and make more houses available for families.
- The Furnished Holiday Lettings (FHL) tax regime will be abolished. This will eliminate the tax advantage for landlords who let out short-term furnished holiday properties over those who let out residential properties to longer-term tenants. It will also support people to live in their local area by increasing access to local housing.
- Multiple Dwellings Relief (MDR) will be abolished to stop widespread abue. MDR, which is a bulk purchase relief in Stamp Duty Land Tax, has been subject to widespread abuse, largely driven by tax-repayment agents who convince individuals to make spurious claims.
If you would like to read the Budget documents, they can be found here.
You can watch the Chancellor’s speech here.
If you would like any further information about anything I have mentioned above, please do send me an email at: jane.hunt.mp@parliament.uk
