What could this year’s Spring Budget bring?
Wednesday 6th March 2024 is a date for our diaries indeed. Why? The Chancellor, Jeremy Hunt, will deliver his 2024 Spring Budget in the House of Commons.
Whilst nothing is set in stone until the day itself, there are plenty of rumors circulating about what this year’s Spring Budget might include.
We’ve gathered speculations from news articles, industry professionals and from our internal team here at Shenward and wrapped them up into an easy-to-read blog.
What is the Spring Budget. A reminder.
It’s likely you’ve heard of it. Maybe you’ve followed it in previous years, or perhaps it’s a headline you skim past. Whatever your level of involvement, the Spring Budget is something that directly affects the UK economy.
The Spring Budget is an opportunity for the Chancellor to provide an update to Parliament on the UK economy and announce his economic plans for 2024-25.
This announcement generally outlines plans for taxes, spending on healthcare, schools, public services and much more.
Post statement, MPs spend several days debating the Budget proposed. They are then asked to approve the tax proposals and the UK government will draw up a Finance Bill to turn the Budget proposals into law.
What’s expected in this year’s Spring Budget?
Let’s dive into the rumor mill. Here’s an overview of what the UK’s top business groups have asked for, what professionals are expecting, and what our team at Shenward are hoping to see this year:
Housing
A new mortgage scheme might be on the horizon
According to reports in the Financial Times, we might well see the introduction of 99% mortgages. This will make it easier for first-time buyers to get onto the property ladder, only needing a 1% deposit whilst the government acts as a partial backer.
Stamp duty cuts are high on the agenda
This isn’t the first year where there’s been pressure on the Chancellor to make changes to stamp duty. Many experts in the field are requesting that the levy be eradicated for older homeowners who are looking to downsize. This, in turn, could incentivise older homeowners to sell, leading to a boost in the property market.
Tax
Are major tax cuts pie in the sky?
Some news reports have suggested that Hunt could cut income tax by 2p and make reductions to National Insurance Contributions. However, with the economy now in recession, it might be unlikely that Hunt will bring these plans to the Spring Budget.
Is it time for Tourist Tax to be abolished?
The British Chamber of Commerce has requested that Tourist Tax be eliminated. This would allow international visitors to the UK to shop tax free.
Sherad Dewedi, our Managing Partneragrees with this, “the high street is losing billions in revenue from overseas visitors – who often have a comparatively stronger spending power. VAT free shopping is something which could solve this problem and give our high streets the boost they need.”
It’s been estimated that this tax costs our retail sector £1.5 billion per year!
Olivia Hudson, Senior Accountant here at Shenward would like changes to VAT in general: “I would like to see VAT being reduced on essential goods like food and energy to help with the cost-of-living crisis, especially given how much the cost of these has increases substantially in recent years.”
This could be the year for the tax threshold thaw
In April 202, thresholds for personal allowance and higher-rate income tax were frozen for four years. In Autumn 2022, the Chancellor extended this freeze to 2028. There is significant pressure on the government to end this freeze early.
Mumtaz, a Senior Accountant here at Shenward states: “I would like the personal allowance to be increased and the basic rate tax to be decreased from 20% to 19% to help with the cost-of-living crisis.” Simone Lewis, another Senior Accountant at Shenward agrees.
Some experts have suggested that the government might also amend or continue to hold thresholds for capital gains tax and dividend tax.
Our managing partner, Sherad states: “On CGT, I want to see a commitment to no changes to Business Asset Disposal Relief to enable entrepreneurs to plan for the long term. The lifetime allowance of £1m needs to be increased back to a minimum of £10m too.”
Inheritance tax removal speculations
MPs are requesting the rate of Inheritance Tax (IHT) be reduced, or even removed. Currently, this tax is charged at 40% on assets or money you leave over the tax-free threshold of £325,000.
There was much debate on this at Shenward. Saleem, one of our Assistant Accountants, is on the IHT abolishment bandwagon: “I would like to see the abolishment or scaling down of Inheritance tax in the Spring Budget for sure.
Other members of the team agreed at a minimum we should see an increase to the nil rate band which has been frozen for over 12 years.
Finance
Will the Lifetime ISA penalty be removed?
The lifetime ISA is a tax-free account designed to help those aged 18-39 to buy their first home or save for retirement. The government pays a 25% bonus on your savings when you come to use them. However, if you want to spend the money on anything other than your first property, or if you are under the age of 60, you’ll receive a 25% penalty when you withdraw. There’s been a lot of pressure from campaigners for this fine to be scrapped.
Workplace
Employment allowances could be set to increase.
The Federation of Small Businesses has urged Hunt to increase the Employment Allowance from £5,000 to £6,500. This £1,500 increase would enable a small employer to hire four employees on the National Living Wage of £11.44 before having to pay 13.8% jobs tax, in turn supporting small businesses and enabling their growth.
Environment
Supplying net zero incentives might be key
Reports have suggested that SMEs feel that there is a lack of direction to invest in net zero measures and that this is one of the biggest blockers in reducing their carbon footprint. The Institute of Directors research suggests that in order to incite change, the government should consider offering a lower corporation tax for organisations who have achieved net zero.
Could VAT on Electric Vehicles be reduced?
The team over at Ernst and Young have speculated that the VAT rate on new electric cars should be reduced or removed altogether to incentivise the purchase of these environmentally friendly vehicles.
Childcare
Child benefit charge alterations
In January of this year the Chancellor acknowledged that the High-Income Child Benefit Charge could be ‘unfair’. Currently, one person earning £60,000 wouldn’t receive any child benefit, while a dual-income family with two parents earning £50,000 each would get the full amount. The threshold in place may well be reviewed this Spring.
Will these speculations become a reality?
Whilst the above are all theories, the likelihood is that some, if not many, of these points will be addressed by Hunt on the 6th of March.
We’ll check back in post budget with a full run down of what is announced and how it could affect you.
