Chancellor Hunt announces £10bn National Insurance cut in pre-election Budget
In today’s Budget statement, Chancellor Jeremy Hunt asserted that the UK economy ‘has turned a corner’ against a backdrop of taxes at a post-War record high and pressure on creaking public services.
Mr Hunt spoke of UK economic growth of 0.8% in 2024 rising to 1.9% next year, up 0.5% on the previous forecast. In respect of inflation, he anticipated it would fall below the official target of 2% in a few months time. Although the overall level of debt remains high in comparison with historical measures, he forecast that the Debt to GDP ratio would fall from over 100% to 94.3% in 2028/29.
Personal tax changes
The Chancellor announced a 2% cut in National Insurance reducing it from 10% to 8% for employees and from 8% to 6% for self-employed workers. This NI reduction is forecast to cost £10 billion.
The higher rate of CGT on residential property was cut from 28% to 24%.
The favourable tax treatment of furnished holiday lets was scrapped from 6 April 2025.
The tax treatment for individuals resident in the UK but non-domiciled was changed, such that in future no UK tax will be levied for the first four years, but thereafter non-doms will pay the same tax as UK residents.
The high income child benefit charge will be increased from income of £50,000 gross to £60,000 gross with a taper rising to £80,000. This is to help ensure that fewer families are impacted by the withdrawal of child benefit where one partner is a higher earner.
Mr Hunt announced the introduction of a British ISA of £5000 per annum, subject to a consultation. This is to incentivise investment in UK equities. It will be an extra ISA allowance on top of the existing £20,000 ISA subscription limit.
Pensions
There were no new changes announced in respect of pensions. The Lifetime Allowance (LTA) will be abolished from April 2024. There will be two new allowances: the Lump Sum Allowance (LSA) will cap the amount of tax-free cash at £268,275, which is the same figure as the maximum previously under the LTA. The Lump Sum and Death Benefit Allowance (LSDBA) caps tax-free lump sums paid during an individual’s lifetime and on death before age 75 at £1,073,100 (the same amount as the LTA). Individuals holding transitional protection will continue to be able to make use of it after April 2024.
Overall, whilst the National Insurance cut will represent a significant saving for workers, the previously announced freeze on tax thresholds means that the tax take is expected to rise to around 37% of GDP by 2028.
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