Jeremy Hunt used the Budget to announce national insurance tax cuts, ahead of an expected general election later this year.
The Chancellor’s March statement to the Commons is his prime opportunity to set out the Government’s tax and spend plans.
Mr Hunt’s headline announcement was a 2p cut to national insurance, matching a reduction announced in the autumn statement, alongside a series of measures to help hard-up households with the cost of living.
The tax cut comes as the Conservatives are attempting to curry favour with the electorate and create dividing lines with Labour, as recent polling suggests just 20% of the public would vote for them at the next election.
The Chancellor’s financial package is billed as a “Budget for long-term growth”, but is set against the backdrop of the UK’s struggling economy, which slipped into a technical recession at the end of 2023.
From 6 April 2024 the main rate of National Insurance contributions for the self-employed will be reduced from 8% to 6%.
Along with the abolition of Class 2 NICs announced at the Autumn Statement.
This helps to grow the economy by encouraging people to work. pic.twitter.com/qsDoddqAxi
— HM Treasury (@hmtreasury) March 6, 2024
Here is a summary of what was announced:
– National insurance cut
A cut in national insurance from 10% by 8% could save the average worker £450 a year, adding up to a £900 saving for 27 million employees when combined with a cut last autumn.
Senior Tories have criticised the move, calling instead for income tax thresholds to be unfrozen, which has led more people to be dragged into higher tax brackets in a phenomenon known as fiscal drag.
– Fuel and alcohol duty freezes
The Chancellor said he would maintain the 5p cut and freeze fuel duty for a further 12 months.
This is expected to save the average car driver £50 next year and bring total savings since the 5p cut was introduced to around £250.
An alcohol duty freeze will also continue until February 2025, with the Chancellor claiming this would help 38,000 pubs across the UK.
The two duty freezes are expected to help reduce headline inflation by 0.2 percentage points in 2024-25.
– Tobacco and flight duties
An excise duty will be introduced on vapes from October 2026, alongside a one-off increase in tobacco duty and a one-off adjustment to rates of air passenger duty on non-economy flights.
– Oil and gas windfall tax extended
The windfall tax on the profits of oil and gas producers will be extended until 2029, with the aim of raising £1.5 billion in tax.
– Non-dom tax status abolished
The special tax status for non-domiciled individuals in the UK, which allows them to pay tax on only their UK earnings, will be abolished.
It will be replaced with a simpler system from April 2025, which Mr Hunt said would be more generous for the first four years, with non-doms having to pay more tax after that point.
This is expected to raise £2.7 billion a year in taxes, and will be used to help cut taxes for households.
– Household support fund
Funding aimed at supporting vulnerable households with the costs of basic goods, and heating their homes through the cost-of-living crisis, will be extended for a further six months.
The Household Support Fund was due to wrap up at the end of March, but should now continue until September.
We’re extending the Household Support Fund with an extra £500m.
Ensuring the most vulnerable households in England continue to get help with the cost of essentials like food and energy. pic.twitter.com/eH3fKv5baA
— HM Treasury (@hmtreasury) March 6, 2024
– Public services
The planned growth in day-to-day public spending will be kept at 1% in real terms but the Government will “spend it better” with a new “productivity plan”, Mr Hunt said.
An NHS productivity plan costing £3.4 billion will meanwhile be funded in full, with the aim of improving the health services IT systems to free up the time of doctors and nurses.
– Childcare
The Government will guarantee pay rates to childcare providers for the next two years, in order to deliver on its care offer for children over nine months old. The package is aimed at getting more working age parents back into work while they juggle caring responsibilities.
– VAT registration threshold
The VAT registration threshold will be increased from £85,000 to £90,000 from the start of April, with the aim of taking “tens of thousands” of businesses out of paying it altogether in order to help them grow.
– Regional investment
The North East of England will be awarded a trailblazer devolution deal, potentially worth more than £100 million.
The West Midlands Combined Authority will be awarded a further £15 million for cultural, heritage and investment projects, while counties including Buckinghamshire, Warwickshire and Surrey will get further devolved powers.
– British ISA
The new savings account will allow an additional £5,000 investment in UK-based companies and assets, with the aim of helping them expand.
