Jeremy Hunt disclosed his Spring Budget 2024, which he calls the “budget for long-term growth” in the UK. It follows the government’s plan to deliver lower taxes, improved public services, and better investment, which will increase the UK’s economy size by 0.2% in FY 2028-29.
The UK economy has dealt with the pandemic, financial crisis, and energy crisis caused by the war in Europe. Hunt aims to support UK families with their cost of living and cutting down on taxes.
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This blog post covers the key points of the UK Budget 2024.
Table of contents
16 Major changes in the UK Budget 2024
1. National insurance tax cuts
The Employee National Insurance rate will be reduced by 2% from 10% to 8% in April. The average worker earning £35,400 will now enjoy a yearly tax cut of over £900.
The Class 4 NIC rate will reduce a further 2p from 8% (as decided in the Autumn statement) to 6% from April.
2. Non-dom tax status changes
A fair and simple system will replace the non-dom tax status from April 2025. Anyone living in the UK but having some overseas link (whether their father is born abroad) comes under this status.
For such people, taxes are applicable only on the money earned in the UK and not their global income. After four years of tax residency, they must start paying taxes in a similar way to other UK residents.
3. Property tax reduction
The higher rate of CGT (Capital Gains Tax) will reduce to 24% from 28. It will increase residential property market demands, creating thousands of associated jobs.
4. VAT registration threshold revision
The VAT registration threshold will change from £85,000 to £90,000 from the beginning of April 2024.
5. Holiday lets tax changes
As the government feels there are bare minimum properties available for local people long-term rentals, tax perks for holiday let owners will be abolished from April 2025. This will probably raise £245m a year for the Treasury.
6. Vaping tax rate raise
The government confirms a vaping products levy to be charged to manufacturers on the import of vaping products from October 2026. This plan will prevent children from purchasing vaping products.
A one-off duty is to be charged on Tobacco to understand the role of vapes in helping people quit smoking. Together, these will raise £1.3 billion by 2028-29.
7. British ISA raise
Investors will receive an additional £5,000 annual tax-free allowance under the British ISA for investing in UK equities. This is to encourage them to invest more in new and innovative projects.
8. Child care advantage
According to the budget, the governmental funding for nurseries and preschools will increase, leading up to 30 hours of free childcare for parents of more than nine months old children over the next two years.
9. Child benefits new rule
Child benefit rules will now be applicable to the collective household income and not just on an individual basis from April 2026. The threshold for high-income tax charge on Child benefits will increase from £50,000 to £60,000, and full repayment of the benefit will only be made when earnings reach £80,000.
10. NHS support
The government will fund an additional £3.4 billion for the NHS to invest in new tech and digital transformation. This includes using AI for form-filling, introducing the latest NHS app for patients, and digitising hospital processes. It will improve patient care and have an estimated £35 billion in productivity savings by 2030. They are also getting a £2.5 billion funding boost for the CY 2024-25.
11. Fuel duty freezed
Fuel duty will freeze at its current level until March 2025, and a temporary 5p cut introduced in 2022 will also be extended.
12. Alcohol duty freeze
The alcohol duty freeze has been extended till February 2025.
13. Public services improvement measures
The Public Sector Productivity Plan reveals a £4.2 billion investment by the government to improve public service delivery.
£800 million will be provided to improve the productivity of public services. It includes £230 million in funding for drones and new technologies and £75 million to roll out the Violence Reduction Unit model across England and Wales.
Spending in the defence sector will rise to 2.3% of GDP in 2025, which is now at 2%.
14. The arts sector development
Theatres, orchestras, museums, and galleries will benefit from a permanent 45% tax relief for touring productions and a 40% tax relief for non-touring productions.
The government will fund £26 million for the maintenance and repair of the National Theater. Any independent film with a budget lower than £15 million will receive a tax credit.
The Treasury will provide a 40% tax relief to eligible film studios in England for the next 10 years till 2034. It will reduce the cost of producing film and high-end TV visual effects.
15. Borrowing new rule
Other than Bank of England debt, any underlying debt will be 91.7% in 2024-25 and fall to 92.9% as a share of the economy in 2028-29 to meet the new debt rule. There will be a fall in the headline debt as a percentage of GDP every year starting from 2024-25.
The UK continues to rank second on the lowest level of government debt in the G7, compared to Japan, France, and the US.
Borrowing falls to a lower percentage every year, according to forecasts. The deficit of GDP in 2023-24 was 4.2%, which is expected to fall to 2.7% in 2025-26. It will meet the second fiscal rule of getting borrowing down below 3% of GDP three years before. The deficit will fall to 1.2% of GDP in 2028-29, the lowest since 2001-02.
16. Air passenger duty increase
Air passenger duty will increase for business class flights.
Economy updates
- The government plans to “fully expensing” leased assets for businesses to eliminate investment into items like new machinery and IT equipment against tax. It will have a £10 billion tax cut for businesses with capital investments in the UK.
- SMEs will receive additional funds of £200 million as an extension of the Growth Guarantee Fund to help more than 11,000 small businesses access Finance according to their needs.
- The government will be funding £160 million on two nuclear sites at Wylfa and Oldbury.
- Another £24.2 million is to be invested in constructing nearly 8,000 homes in Barking Riverside and Canary Wharf, London.
- The new North-East trailblazer devolution deal will fund local leaders with over £100 million to devolve for more powers to Buckinghamshire, Surrey, and Warwickshire.
- The government will support the first growing industries for the next five years. The plan provides tax relief of £1 billion to creative industries £270 million for automotive and aerospace R&D projects.
- The government will provide another £120 million in funds for green industries to develop technologies like offshore wind farms and carbon capture and storage projects.
- The government will offer £45 million to medical research units to develop new medicines for threatening diseases like epilepsy, cancer and dementia. According to the plan, the government will invest £650 million on AstraZeneca to construct a new vaccine manufacturing unit in Liverpool and Cambridge.
- The government extends the windfall tax on the profits made by the North Sea oil and gas companies by a year, introduced in May 2022 and due to end in March 2028 and is now extended to 2029, raising an expected £1.5 billion.
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Inflation forecasts
Inflation in the UK is expected to fall below the 2% target of the government in a few months from 4% in January. The Bank of England’s long-term target is to keep inflation at 2%.
Growth forecasts
According to the government, the economy in the country is expected to rise 0.8% this year, followed by 1.9% in the next year, and rising to 2%, 1.8%, and 1.7% in 2028. OBR forecasted a growth of 0.7% in the economy in November 2024, and rising to 1.4% in 2025, 2% in 2026 and 2027, and 1.7% in 2028.
Image Credit: Hannah McKay/Reuters