09 Jan 2024
HM Treasury has set a Spring Budget date of 6 March 2024 - one of many key fiscal dates in the early part of the year. As an accountant, you and your clients will doubtless be focused on the outcomes.
The Chancellor, Jeremy Hunt, has also commissioned the Office of Budget Responsibility to prepare an economic and fiscal forecast, which is to be presented to UK Parliament alongside the Budget. Public finances, borrowing forecasts and significant changes to public services will be highly scrutinised.
This article looks at the key predictions for the Spring Budget 2024 from spending plans to tax giveaways and prospective inheritance tax cuts.
20:20 Innovation will also be offering our Branded Budget PDF product from as little as £184, providing an expert-led analysis of the Budget on 6 March.
Only 4 working weeks passed between the 22 November 2023 Autumn Statement and the government beginning preparations for the 6 March 2024 Budget.
In previous years, when a Budget has been held in the Spring, it is often scheduled for mid-March. In 2021 we did see a Budget held on the 3rd of the month but, of course, not much could be considered normal in 2021!
The relatively early Budget date is fuelling speculation about the possibility of a Spring general election. Local elections are due to take place on 2 May 2024 so that date could be a contender for a wider general election. We can expect all political parties to enhance their strategic preparations for an upcoming election, including formalising their stance on taxation policies.
A lot of statements will be communicated in general and professional media, but accountants like us must remain mindful of the difference between a political party communicating what they would do if in power and actual tax policy changes being made. We will need to take great care with client communications.
Clients will no doubt be hopeful of major tax cuts from the Conservative government alongside schemes to improve economic growth. Little is certain, but we do have some strong indications on the following:
Inheritance Tax (IHT) is currently levied on the estates of certain deceased persons as well as on certain lifetime gifts. IHT applies to the value of an estate that exceeds a specified nil-rate band. The IHT tax rates range from 0% to 40%, and the tax is calculated on the total value of the estate, including:
Lifetime gifts may also be subject to IHT, especially if made within seven years before the individual's death. Whether on death or as a result of a lifetime transfer, certain exemptions and reliefs may apply in the calculation of IHT.
It is certainly an unpopular tax, although it is reported to affect just 4% of estates.
Rumours are rife that abolition of the tax would be an election-pleasing policy (and we can certainly see it would constitute tax simplification!) but the Conservative party is downplaying the idea.
Income tax bands may be increased for the first time since April 2022, releasing UK taxpayers from ‘fiscal drag’.
The personal allowance has been set at £12,570 since the 2021/22 tax year, with further reductions for those with income above £100,000.
Similarly, the basic rate band has been fixed at £37,700 since 2021/22 and, for additional rate taxpayers, the additional rate band actually reduced from £150,000 to £125,140 in 2023/24.
With these bands currently frozen in place until April 2028, earlier application of inflationary increases would benefit all UK taxpayers and be a welcome pre-election measure.
We must note that alternative bands apply to non-savings income in Scotland.
Building on the reductions to National Insurance Contributions (NICs) announced by Jeremy Hunt in the Autumn Statement, we may see a reduction in income tax rates in the Spring Budget. The Conservative party has previously signalled a path to reducing the tax burden, and the electorate's desire for income tax cuts is well understood.
Income tax is currently assessed at 20% within the basic rate band, 40% in the higher rate band, and a top additional rate of 45%. Alternative rates apply to saving and dividend income and to income earned by Scottish taxpayers. Most likely is a 1-2% reduction in the basic rate of income tax.
Some headway was made in the Autumn Statement but the consensus in the accounting profession was that the government had not gone far enough in the adaption of the reporting rules as we approach the April 2026 start date.
It's widely believed that raising the registration threshold for VAT would positively impact economic growth. Some businesses take measures to keep their business turnover below £85,000 to avoid the need to register for VAT. This threshold could therefore be seen as a barrier to growth in UK business. Having been set at £85,000 since 1 April 2017, an increase would seem likely.
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Picking up on a rumour from November 2023 that did not come to fruition in the Autumn Statement, we may well see an increase to the main £20,000 annual ISA saving limit (and other ISAs) to encourage and reward savers.
It seems certain that we’ll hear more about pension reform to ensure better outcomes for savers, including the proposed lifetime provider model to avoid individuals building up multiple small pension pots as they take their careers through multiple employers.
As introduced at Autumn Statement 2023, we may see measures to simplify the UK’s capital allowances legislation. With full expensing for companies and wider application of cash accounting for self-employed people already underway, this may not however grab the desired headlines.
A temporary 5p cut in fuel duty is due to come to an end on 23 March 2024. The 6 March Budget may extend the cut and/or address inflationary increases to the duty that are also soon due to be imposed.
This may be the crucial question for the Spring Budget on 6 March 2024. Can the government afford a package of measures such as the above, taking effect from 6 April 2024? Probably not.
It is understood that a ‘5-year tax-cutting plan’ is being worked up, meaning measures announced in the Spring could be phased in over several years - subject to a change in Government. In anticipation of a new government, of course, all eyes will be on Labour's shadow financial secretary.
Given the significance of this budget, preceding a general election, there will be a huge amount of interest from accountants and your client base on the outcomes. With that in mind, 20:20 Innovation are once again offering expert-led insight into all things Budget in Spring 2024.
On 7th March you will be able to join Tax Technical Director, Sharon Cooke, on our Budget Update webinar.
This training will be free to all 20:20 Innovation members as well as anyone (including non-members) who purchases our Branded Budget PDF product. The training will even follow the order of our newsletter content to help accountants understand and communicate the changes to their clients.
We will also be offering an additional Tax Rates PDF product to summarise the government’s tax changes, any easing of the tax burden and any other significant changes.
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