Where were the bunnies? – Our Uncommon View on The Spring Budget 2024

Usually, in the run up to a Budget, the Chancellor will downplay expectations, only to surprise everyone on the day by turning into a magician and pulling a couple of rabbits from his hat.

Anyone who’s listened to a Budget before will have heard the line “But today, I can announce that we will take this further by…”

And with an impending election on the horizon, many of us were waiting for a significant number of these rabbits to be pulled from the hat – because the pre-announced measures were not exactly revelatory or ground-breaking.

But as it turned out, there was really nothing more to add.

There were no rabbits in the headlines.

There were a handful of new measures, but the main announcements had already been leaked, and other announcements built on measures outlined in the last Autumn Statement.

The biggest headline – widely trailed beforehand – was a further 2% cut to employees’ national insurance and self-employed national insurance.

But because income tax thresholds continue to be frozen – not raised in line with inflation – many people will continue to see a higher proportion of their salary taken in tax due to ‘fiscal drag’.

In fact, by freezing income tax bands, the Chancellor is effectively imposing an income tax increase.

We have previously referred to this as the boiling frogs approach to taxation.

It’s also worth noting that employer Class 1 NICs will remain at 13.8% for wages paid in excess of £9,100 a year (£175 per week).

Many employers would have hoped for a reduction in employer’s NIC to offset the significant increase in the National Living Wage that come into force on 1^st April 2024, along with other rising costs.

And for the second time in a few months, businesses will need to update their payroll before the changes to NIC come into force in April.

Another headline announcement – which had also been leaked in advance – was that the current remittance basis of taxation will be abolished for UK resident non-domiciled individuals from 6^th April 2025. A change that will grab headlines, do little for the economy but take away an attack line from the Government’s opposition.

So, there were no rabbits – but the Chancellor did have a couple of small tricks up his sleeve for businesses and individuals.

In fairness, it’s hard to have too many tricks up your sleeve when you’re wearing a self-imposed fiscal straitjacket.

In a welcome increase for small businesses, from 1st April 2024, the VAT registration threshold and deregistration thresholds will each increase by £5,000 to £90,000 and £88,000 respectively. The thresholds have previously been frozen since 1^st April 2017.

Another welcome update for some businesses was the permanent full expensing on leased assets “as soon as affordable”. The first-year capital allowances relief known as ‘full expensing’ was made permanent in the 2023 Autumn Statement, however, expenditure on plant and machinery that was then leased to customers was excluded.

Fuel Duty and Alcohol Duty was frozen until 2025, and there were some positive announcements for creative industries, including a welcome funding boost for Theatr Clwyd close to our Wrexham HQ in North Wales.

For some parents, the changes to the ‘High-Income Child Benefit Charge’ (HICBC) will be welcome.

The Child Benefit system has previously been criticised for being unfair to households with one high-earning parent. And the child benefit ‘high-income’ threshold has been the same since 2013, despite a cost-of-living crisis and a significant rise in the cost of childcare.

Under the current system, if one partner earns more than £50,000, child benefit is gradually withdrawn, so that if they earn £60,000, they do not receive any child benefit at all. Whereas two parents earning £50,000 a year each would receive child benefit in full. This has often been seen as unfair, particularly on households with one working parent.

From April 2024, the Child benefit ‘high-income’ threshold will be increased and the Chancellor also announced that by April 2026, the government intends to administer the HICBC on the basis of total household income, rather than the income of the highest earner in the household.

In other tax increasing measures, the furnished holiday lets tax regime will be abolished, Multiple Dwellings Relief (MDR) is to be removed for purchases of residential property in England and Northern Ireland from 1^st June 2024, and the Chancellor announced plans for a tax on vaping products from October 2026, along with an increase in tobacco duty to ensure it remains more expensive than vaping.

The truth for most businesses and individuals is that a couple of rabbits were never going to make much difference anyway.

As our regulatory body the ICAEW said about this Budget: “Long-term challenges, such as the weak economy, underperforming public services and unsustainable public finances and demographic changes, have been largely unaddressed.”

If Jeremy Hunt was a magician, then the point of his act wasn’t to improve prospects for businesses or individuals, but to improve his party’s electoral chances.

It will be up to the next government to solve the really big issues facing our economy.

Will there be a new show in town? We will know when the votes are counted.

The Spring Budget 2024 – Contact Our Accounting and Tax Experts

If you have a question about any of the measures announced by the Chancellor in The Spring Budget 2024 and how they might affect you or your business, please get in touch with us and we would be happy to help.

Call us on 0333 242 3743, or email: support@theuncommonpractice.com

Important Disclaimer

This material is published for client information. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. No responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by The Uncommon Practice.

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