You are here: Home - News -

The latest Budget rumours and predictions

  • 05/03/2024
  • 0
The latest Budget rumours and predictions
With just one day to go until Jeremy Hunt’s Budget, we’ve taken a look at what the famous red briefcase might contain.

Hunt will deliver his 2024 Spring Budget to the House of Commons on Wednesday (6 March). But with a possible general election this year, what changes might he announce?

The 2024 Spring Budget follows November’s Autumn Statement, which saw cuts to National Insurance rates, an increase to the National Living Wage and new rules for benefits claimants.


Income tax cuts

There have been various hints that the Budget may contain cuts to income tax.

Reducing income tax would boost take-home pay for UK workers. Another option for the Chancellor is to uprate income tax thresholds to lift the personal allowance to more than £13,400 and take the higher-rate threshold to more than £53,600.

Calculations by AJ Bell suggest that higher-rate taxpayers could be £842 better off if thresholds were increased, illustrating that in many cases lifting thresholds is worth more to taxpayers than cutting rates.

Laura Suter, director of personal finance at AJ Bell, said: “Uprating current income tax thresholds by last year’s inflation figure is the most lucrative of the options on the table for higher earners. Uprating it with September’s reading of CPI inflation, which was 6.7 per cent, would increase the personal allowance from the current £12,570 up to £13,412 and increase the point you pay higher-rate tax from £50,270 up to £53,638. That would mean anyone earning more than the new higher-rate threshold would be better off by £842 per year. It would also benefit basic-rate taxpayers, who would save a more modest £168 per year in tax.

“However, a cut to the basic rate of income tax to either 19 per cent or 18 per cent is the more lucrative option for many basic-rate taxpayers. A cut to 19 per cent would mean a £224 tax saving for someone on £35,000 per year, while a cut to 18 per cent would cut their tax bill by almost £450 per year – far more than the saving they get from inflation uprating.

“It’s a different story for higher earners, who benefit more from the inflation uprating. Even a cut to 18 per cent for basic-rate tax only nets them £754 in comparison to the £842 they save through thresholds increasing.”


National Insurance changes

The government has recently cut National Insurance, but that hasn’t stopped rumours of a further cut to this tax.

The selling point of cutting National Insurance is that it is more targeted at workers, as it isn’t paid by those over state pension age. However, self-employed people are also still waiting for their previously announced cut to National Insurance, due to come in in April.

In the Autumn Statement, the government opted to cut the starter rate of National Insurance from 12 per cent to 10 per cent. This is the rate charged on the band of earnings between £12,570 and £50,270.

If it cut that rate again to nine per cent, it would mean an annual saving of £124 for someone on £25,000, all the way up to a saving of £377 for anyone earning more than the £50,270 threshold.


Abolition of holiday lets regime

The Chancellor is rumoured to be announcing a £300m tax raid on second homeowners who make money from holiday lets to help finance the rumoured tax cuts.

The furnished holiday lets regimes means that landlords can claim capital gains tax relief for trades, they are entitled to plant and machinery capital allowances, and products count as earnings for pension purposes. They can also deduct mortgage interest payments from rental income.

Ben Edgar Spier, head of regulation and policy at Sykes Holiday Cottages, said: “A report we commissioned by Oxford Economics found that short-term lets contributed over £27.7bn to the UK economy in 2021 and supported over 500,000 jobs amongst local residents. It’s illogical to penalise short-term let businesses over those with empty second homes when you consider the benefits tourism brings to local economies throughout the UK.

“There are nearly 1.4 million vacant homes in England, according to ONS figures – nearly 16 times more than holiday lets – and more than 100,000 in Wales. It makes more sense to tax these vacant buildings or underused second homes, which both contribute very little. A tax such as this would also encourage people to either sell empty second homes or let them.”


A new tax on vaping

According to the BBC, the Chancellor is considering bringing in a new tax on vapes in the 2024 Spring Budget. The new duty could be levied on the liquid in vapes, with higher tax rates for products with more nicotine.

Vaping products are currently subject to VAT – but, unlike tobacco, they are not also subject to a dedicated levy.

Ministers fear that the relatively cheap cost of vaping means that the products are more accessible for young people.

There are 0 Comment(s)

You may also be interested in