Spring Budget changes look set to benefit those on middle to lower incomes

National Insurance cut of 2%, changes to the income threshold for Child Benefit and an increase in the VAT threshold. This week saw Jeremy Hunt deliver his 2024 Spring Budget, several partners at Price Bailey, shared their initial reactions to the news.

Gemma Thake, Tax Partner at Price Bailey comments:

In the Chancellor’s announcement, he quoted the lowest effective personal tax rate since 1975. With the rates of income tax and national insurance taken into consideration, this is a very favourable tax position for the median full-time worker in the UK at the moment.

It is also noteworthy that the Chancellor confirmed the cut in National Insurance will apply to self-employed individuals as well as employees. However, those who are not employed or self-employed, such as pensioners, will lose out as a result of the changes and many will be worse off from next month

Gemma continues:

Although not an immediate fix, the increase in Child Benefit thresholds should extend the benefit to more families and support working parents in addition to free childcare hours which are being increased and phased in from April 2024. Parents will however have to wait until 2026 for further reforms to the regime.

Whilst there will be some benefit to those in affluent positions, the highest earners are ultimately set to pay more tax as a result of the government’s freeze to income tax bands which have not been increased since March 2021 to keep pace with wage rises and inflation.

It seems this Budget’s changes are really designed to be more family-friendly and impact those people on middle to lower incomes

Plans to increase the VAT threshold were also announced. Greg Mayne, Tax Partner and VAT specialist comments:

The 2022 Autumn Statement effectively negated any rise in the VAT registration threshold (from £85,000) until 2026, but this week’s announcement of a £5,000 increase from 1 April could be argued to be something and nothing.

The ‘cliff edge’ of registration remains, and businesses will still be caught out by tripping over that threshold which provides only another £416.66 per month of ‘buffer’ before having to register.

At £90,000 the limit remains substantially higher than EU Member States, and only marginally above that of Switzerland. Pre-Budget gossip of a possible increase to £100,000 came to nothing so the impact on business of this small rise could be argued to be negligible.

The announcements also highlighted how wealthy UK-domiciled residents could save millions in tax under new non-dom tax regime. Nikita Cooper, Tax Director comments:

Wealthy UK-domiciled residents could make significant tax savings under the new regime. It’s possible that some UK-domiciled residents will leave and return to take advantage of the new four-year grace period, potentially saving millions in tax.

Domicile is a principle which determines which legal regime applies across a multitude of taxes. Inheritance tax is just one area where there is likely to be considerable uncertainty until the new rules are finalised.

There are some fairly optimistic assumptions about how much tax the new regime will raise but the devil will be in the detail. Many non-doms will be more concerned about wealth than income. If the new inheritance tax regime is equivalent to that which applies to UK-domiciled taxpayers, many UK resident non-doms might opt to leave or move wealth offshore.

For a summary of the Spring Budget 2024 visit here.

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