MARCH BUDGET 2024

Today’s budget announcements came with much anticipation, given talk of tax cuts in light of a general election within the next 10 months, whilst tax revenue as a proportion of GDP is presently at its highest in living memory.

In essence, much of what was announced had already been circulating in the press in advance.

It had been widely speculated that Jeremy Hunt would announce a 2% cut in National Insurance and this was delivered. This saves the average worker £450 per year, or average self-employed worker £350. Income tax was unchanged, reflecting the government’s preference to target cuts towards those in work.

Whilst this was the main headline affecting the broadest number of people, further cuts included the higher rate of capital gains tax on residential properties from 28% to 24%, and an increase in the child benefit threshold from £50,000 to £60,000, with a view to a complete overhaul of child benefit assessment by 2026.

Perhaps the most notable measure to fund these cuts was the scrapping of non-dom tax rules afforded to predominantly wealthy individuals who are resident in the UK but choose to be domiciled for tax elsewhere.

Many suspected that tax cuts would be accompanied by changes to public sector spending plans, however this did not come to pass with the 1% a year increase being maintained overall, albeit some non-ringfenced areas such as local government and the prison service are expected to see reduced funding in real terms.

Other areas of interest from a personal finance perspective include a proposed £5,000 additional ISA allowance, specifically for investment in the UK, along with a British Savings Bond offered by NS&I that should offer a competitive rate of interest over a three-year term.

The pension proposals announced back in March have been maintained – this includes a suggested ‘pension for life’ whereby a pension fund can be portable across changes in employment. There were no changes to the taxation of pensions, with the abolition of the lifetime allowance and replacement regime set to commence in April as planned.

Overall, the government has described this as a ‘budget for long term growth’ citing cuts in taxation alongside targeting inflation as a priority. With an Office of Budget Responsibility forecast that inflation is to fall below 2% ‘within months’ it could be argued that we are ahead of schedule in this regard, but with economic growth still sluggish and overall taxation still higher than it has been since the Second World War, it remains to be seen how effective these latest changes will prove to be.