THE CHANCELLOR Jeremy Hunt delivered his spring budget today targeting 0.8% growth of the economy this year.

Taxes

The Chancellor said that the economy is “turning a corner” and that inflation is expected to fall to the 2% target in the next quarter.

Key measures announced in the Budget include cutting Employee National Insurance tax cut from 10% to 8% in April for 27 million working people.

Two million self-employed workers will receive a 2p reduction in the NICs main rate dropping from 8% to 6%. Also, from 6 April 2024, self-employed people will pay 8% on profits between £12,571 and £50,270, down from 9%.

High Income Child Benefit Charge (HICBC) will be administered on a household rather than an individual basis by April 2026. Around half a million families will benefit from an increase in the threshold from £50,000 to £60,000 and raising the level at which Child Benefit is fully repaid to £80,000 – worth £1260 per family on average.

The ‘non-dom’ tax regime will be abolished and replaced with a new system from April 2025 where new arrivals to the UK pay the same tax as everyone else after four years – raising £2.7 billion a year by 2028/29.

The 5p cut and freeze to fuel duty is maintained until March 2025.

Business Tax

The threshold at which small businesses must register to pay VAT will rise from £85,000 to £90,000 from April 2024. About 28,000 SMEs will be taken out of VAT registration altogether.

Also announced were tax breaks for TV and film, and a new tax credit for independent British films with a budget of less than £15 million. Orchestras, museums, galleries and theatres get a permanent 45% tax relief for touring productions and 40% relief for non-touring productions.

The Green Industries Growth Accelerator will be allocated an extra £120 million to build supply chains for offshore wind and carbon capture and storage.

The Energy Profits Levy will be extended by a year to March 2029, raising £1.5 billion.

The higher rate of Capital Gains Tax (CGT) on property will be cut from 28% to 24% from April 2024.

Public Spending

Day-to-day public spending will increase by 1% higher than inflation on average over the next parliament.

The Public Sector Productivity Plan announced today with £4.2 bn to improve public service delivery through better technology. The NHS will receive £3.4 bn of this to invest in new tech and digital transformation, including making the NHS app a single front door for patients, piloting new AI for form-filling, rolling out universal electronic patient records, and AI-fitted scanners to read MRI scans more accurately and quickly. This improves patient care and helps unlock £35 billion in productivity savings by 2030 the government says.

£800 million will be invested to boost productivity across other public services, including £230 million for drones and facial recognition. The Violence Reduction Unit model will be extended across England and Wales costing £75 million.

Other measures include digitising jury bundles and the use of AI across government to spot and catch public sector fraudsters.

Defence spending is expected to hit 2.3% of GDP next year after the £11 bn investment announced at Spring Budget 2023.

Sector Investments

Over the next five years, £1 billion in new tax reliefs for creative industries are planned, £270 million in automotive and aerospace R&D projects, and a £120 million top up for the Green Industries Growth Accelerator to help build supply chains for offshore wind and carbon capture and storage.

£45 million will fund medical research and a £650 million AstraZeneca investment to build a new vaccine manufacturing hub in Liverpool and expansion in Cambridge.

The Long Term Plans for Towns allocates £240 million to build nearly 8,000 homes in Barking Riverside and Canary Wharf alongside a new life sciences hub, and £160 million deal to acquire two nuclear sites.

A North-East trailblazer devolution deal with potential up to £100 million, and powers devolved to Buckinghamshire, Warwickshire and Surrey.

‘Full expensing’ will be added to capital allowances for business to leased assets.

A new tax-free UK ISA for £5,000 annual investments in UK equities

Public Finances 

A duty on vapes will be introduced from October 2026 raising £1.3 billion by 2028/29.

Multiple Dwellings Relief will be abolished from June raising £385 million a year. The Furnished Holiday Lettings tax regime will be abolished from April 2025, raising £245 million a year

INDUSTRY COMMENT

No rabbits, no hat for the construction industry

Brendan Sharkey, Head of Construction and Real Estate at MHA

Brendan Sharkey, real estate and construction specialist at MHA, said: “Maybe there was too much logic to think that the Chancellor would address the housing market in today’s Budget announcement.

“Housing, along with Education and Health are primary needs. Unfortunately, unlike the latter two Housing provision is not under the control of government and it needs a stimulus. The development of more affordable and energy efficient housing should be a point of policy, particularly given the current status, which is clearly recognised by Michael Gove.

“Reforms to SDLT by increasing the nil rate band to help first time buyers, making the duty payable by the seller and not the buyer, incentivising downsizers would have increased the volume of transactions but not diluted the Exchequers tax take.”

The Chancellor deserves some thanks

Peter Stimson, head of product at MPowered Mortgages, said: “Rather than the rumoured Stamp Duty giveaway for first-time buyers or a headline-grabbing but plainly bonkers plan to bring back 99% mortgages, what we got in the end was tweaks rather than turmoil.

“With house prices already rising in many areas and the cost of borrowing coming down, the property market is sparking back into life and the last thing the market needed was additional stimulus when supply remains very constrained. For that at least, the Chancellor deserves some thanks.

“Perhaps the best news for the property market came from economics rather than politics. The OBR is now predicting that consumer inflation will dip below 2% within a few months – nearly a year sooner than it previously forecast – and this will increase the pressure on the Bank of England to bring forward welcome interest rate cuts.”

Missed opportunity

Brian Berry, Chief Executive of the FMB

Brian Berry, chief executive of the FMB, said: “The Budget could have been an opportunity to kickstart the housing market with house building rates stagnant, but the Chancellor has done nothing. It was also disappointing there were no new measures to help homeowners improve the energy efficiency of their homes. This was an opportunity to reform the planning system, boost local authority planning teams’ capacities, and review the financial burdens the planning system places on smaller house builders, but again these much-needed reforms have been overlooked.

“The Chancellor could have helped to close the construction skills gap ensuring the UK has the workers with the green skills needed to retrofit the UK’s homes, and provided support to help small builders deal with the administrative burden of training apprentices. All these areas could have grown the economy, instead builders got left behind – this Budget was a missed opportunity.”

A flop

DeVere Group’s Nigel Green said: “Going into the Budget, we already knew that the Chancellor would announce a further cut to national insurance and extend a freeze on fuel and alcohol duty … we knew this because it was announced in advance.

“But the fact remains that the personal allowance – the amount people can earn before starting to pay tax – and the thresholds for the higher and additional rates – are frozen again. This means that as wages increase, more people will be pushed into higher-rate tax bands.”

“The tax burden in the UK is now to reach the highest levels in 70 years. The Chancellor is dangling the carrot to potential voters by hinting at more tax cuts to come in the next Parliament. In many ways the Chancellor’s Spring Budget was lacklustre.”

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