FIVE TAKEAWAYS FROM THE UK BUDGET

Wed 06 March 2024:

UK finance minister Jeremy Hunt announced new tax cuts Wednesday as the ruling Conservatives try to haul back support from a resurgent Labour Party before this year’s general election.

These are the main measures in a highly political budget designed to persuade voters to stick with the Tories rather than return Labour to power after 14 years in opposition.

– Payrolls tax cut –

Hunt confirmed he would cut national insurance — social payments made by employees and employers — by two percentage points to eight percent from April, matching a reduction announced in November.

The measure will cost £10 billion ($12.7 billion) per annum and will save the average worker £450 a year, the government said.

Experts and Labour insist the UK’s overall tax burden is at its highest for decades due to the freezing of income tax thresholds which has seen taxpayers dragged into paying higher rates.

Hunt also cut the top rate of capital gains tax, which is paid on property sales, from 28 percent to 24 percent.

– ‘Non-dom’ changes –

The chancellor announced he would tighten a loophole that allows people with “non-dom” status, those who live in Britain but whose permanent domicile is abroad, to avoid UK tax on income earned outside the country.

The status has been controversially used by some of Britain’s wealthiest residents, including Prime Minister Rishi Sunak’s wife the Indian businesswoman Akshata Murty, to reduce their tax bill.

Hunt said that from April next year, new arrivals will only be able to avoid tax on foreign income for their first four years in the country.

The government estimates the stricter system will raise £2.7 billion a year.

Labour had pledged to end the loophole, with Hunt’s move blunting one of the opposition’s flagship policies.

– Windfall tax extended –

The government extended a 35 percent windfall tax on profits of oil and gas companies until 2029, which is estimated to bring in £1.5 billion of revenue.

The measure was first introduced in 2022 as energy companies benefited from a surge in energy prices caused in part by Russia’s war against Ukraine.

Hunt also said he would introduce new tax on e-cigarettes, also known as vapes, increase tobacco duty, and implement higher taxes for business class flights.

He also announced the abolition of some tax breaks for owners of second homes who rent them out to holidaymakers.

– Duty freezes –

A 5p cut in fuel duty was extended to help motorists but will cost the state coffers £3 billion in the 2024-25 financial year. Alcohol duty was also frozen.

The earnings threshold at which child welfare payments are taxed was raised to £60,000 from £50,000 while he unveiled a new British ISA to encourage investment in UK assets.

– Spending and growth –

Hunt said the government would increase spending by one percent a year over the next five years, which would be supplemented by an improvement in the productivity of public services.

He announced £3.4 billion plan for reforms to the public National Health Service, including modernising outdated IT systems.

The chancellor added that British gross domestic product was expected to expand 0.8 percent this year, citing the UK’s fiscal watchdog, the Office for Budget Responsibility.

This was only slightly up on a previous OBR forecast of 0.7-percent growth.

-NEWS AGENCIES

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