Families Will Be Worse Off Despite Tax Cuts

In what is surely the last budget before an upcoming General Election, British Chancellor Of The Exchequer delivered a list of key measures in front of a packed House Of Commons which the current Conservative Government hopes to put in place in order to strengthen the economy and improve the lives of all citizens. There had been a lot of hype in the build up to his speech as to whether there would be many tax cuts or give aways which would help to sway the vote in favour of the Government. Although there were some attempts to make things easier for the lives of British citizens, a leading think tank deemed it too little to make up for the impact of previous tax increases and price rises.

The Institute for Fiscal Studies (IFS) said households would be worse off at the election, expected this year, than they were at the start of this parliament.

The chancellor has announced a cut to National Insurance worth £10bn.

Despite that, this will be a record tax-raising parliament, the IFS said.

The Chancellor tried to give people a reason to look forward to a brighter future in which they could expect a reasonably better lifestyle with better career and business prospects. With the UK's economy currently in recession, after the country's GDP shrank by 0.3% in the last three months of 2023 following a previous contraction of 0.1% in the third quarter. The Chancellor hopes the measures he will be introducing will help inspire confidence among all sectors of the economy.

Some of the main points which were highlighted included upgrades to the forecasts which illustrate that the UK is turning the corner and would be back on the route to growth as had previously happened with the inflation rate.

The extra leeway afforded by those higher predictions on growth, and a handful of tax-raising measures, allowed him to cut another 2p from National Insurance Contributions (NIC), levied on pay packets throughout the UK, on top of a 2p cut he made in January.

Mr Hunt also gave a long term forecast in which he hoped to shift the tax burden away from workers in an effort to encourage those who are out of work to get back in to the work place.

"The big picture on tax remains much the same," said IFS director Paul Johnson. "This remains a parliament of record tax rises.

"Overall, for every £1 given back to workers (including the self-employed) by the NICs cuts, £1.30 will have been taken away due to threshold changes between 2021 and 2024, with this rising to £1.90 in 2027."

Labour leader Sir Keir Starmer said the government's strategy was to "give with one hand, and take even more with the other".

Some of the key measures in the budget included:

Taxation

National Insurance, a payroll tax, cut by 2p in the pound for employees and the self-employed

The salary thresholds at which people start paying income tax and national insurance remain frozen - meaning people will pay more tax as their incomes rise, a process called fiscal drag.

Non-dom tax regime, for UK residents whose permanent home is overseas, to be replaced with new rules from April 2025

£5,000 UK ISA tax allowance for savers investing in "UK-focused" shares - to be set up following a consultation

Benefits and Income Tax

Full child benefits to be paid to households where highest-earning parent earns up to £60,000 - the current limit is £50,000

Partial child benefit to be paid where highest earner earns up to £80,000

Longer repayment period for people on benefits taking out emergency budgeting loans from the government

Government fund for people struggling with cost of living pressures to continue for another six months

£90 admin fee to obtain a debt relief order scrapped

Cigarettes, vapes and alcohol

Freeze on alcohol duty, which had been due to end in August, to continue until February 2025

New tax on vaping products from October 2026, linked to the levels of nicotine

Tobacco duty to go up £2.00 per 100 cigarettes at same time, to ensure vaping remains cheaper

Transport and Energy

Fuel duty frozen again, with the 5p cut in fuel duty on petrol and diesel, due to end later this month, kept for another year

"Windfall" tax on the profits of energy firms, which had been scheduled to end in March 2028, extended until 2029

Air passenger duty, the tax paid on flights, to go up for business class tickets

£160m deal for UK government to purchase site of planned Wylfa nuclear site in north Wales

A further £120m for a government fund that invests in green energy projects

Housing

Higher rate of tax paid on profits from selling property cut from 28% to 24%

Tax breaks for owners of holiday let properties scrapped

Stamp duty tax break when purchasing multiple properties in England or Northern Ireland to end in June

Public Debt

Office for Budget Responsibility predicts UK economy to grow by 0.8% this year and 1.9% next year

Growth of 2% predicted for 2026, with 1.8% in 2027 and 1.7% in 2028

UK's inflation rate forecast to fall below 2% target by the end of June, falling to 1.5% next year

Public debt, excluding Bank of England debt, forecast to be 91.7% of GDP this year, rising to 92.8% next year

Overall day-to-day government spending to grow by 1% in real terms over next five years

NHS budget to go up £2.5bn next year; the service will also get £3.4bn up to 2030 to improve productivity

Business and Investment

Threshold at which small businesses must register to pay VAT raised from £85,000 to £90,000 from April

Covid-era government loan scheme for small businesses extended until March 2026

Tax reliefs for touring and orchestral productions, which had to been due to end in March 2025, made permanent

Other Measures

£1m for a memorial to honour Muslims who fought for Britain during World War One and Two

A new tax credit for independent UK films with a budget of less than £15m

In response to what the Chancellor said, Amanda Pritchard who is the Chief Executive of the NHS said,

"From record numbers of cancer checks to more young people than ever before receiving help with their mental health, NHS staff are delivering more and more for patients every year. Today's announcement shows the government continues to back the NHS and the £2.45bn of extra funding for next year ensures we have the support we need to make continued progress on our key priorities for patients.

"Adopting the latest technology is already having an impact on the way we deliver services for patients – including getting your prescriptions on the NHS App and virtual wards which let people recover at home. The significant £3.4bn investment in capital to fund new technology means the NHS can now commit to deliver 2% annual productivity growth in the final two years of the next Parliament, which will unlock tens of billions of savings."

Kevin Monaghan, Chief Commercial Officer at Complete Technology Group, said: “It was disappointing that the purported crackdown on broadband providers inflicting substantial mid-contract price hikes was absent from the Chancellor's budget. Broadband must be accessible to everyone, and affordable connectivity is essential in widening digital inclusivity, and we would have wholly supported this measure.

“It was also disappointing not to see provisions in the Budget for improving digital infrastructure across the UK. The focus is often on delivering Full Fibre broadband to remote, rural areas, yet there is substantial long-term investment and policy required to improve Full Fibre availability in urban areas. Millions of people living in Multi-Dwelling Units (high-rise blocks of flats) still lack access to reliable broadband - something that is now considered a vital modern-day utility.

“Access to reliable, safe, and Full Fibre broadband is crucial for economic development and social inclusion. Therefore we call on the Government to prioritise any action that ensures no one is digitally left behind."

Andy Mielczarek, founder and CEO of SmartSave, a Chetwood Financial company, said: “Cutting NI will be celebrated, but we cannot escape the limited effect it will have. Someone on a salary of £30,000 will only get an extra £348 in their pocket annually thanks to the change, which will do little to reverse the impact of rampaging energy bills, food prices and living costs over the past two years.

“We should not be overly critical; the Chancellor does not have a bottomless pot of funds to allow for huge sweeping tax cuts. Instead, though, it would have been good to see a greater focus on policies and reforms that could empower people to effectively save, invest, and achieve their financial goals.

“Steps need to be taken to simplify and incentivise savings. There is also a pressing need for better education and support when it comes to financial planning, helping people to better assess the wide variety of savings products and providers available to them. Tax cuts need to be bolstered by greater investment into schemes that protect and serve consumers as they make financial decisions."