REACTION: SPRING BUDGET 2024

One of the fascinations of Budgets is the way they balance economics with politics. Chancellors of all political stripes will deny it of course, saying they are only doing what is best for the economy, but it is inevitable that in such a big set-piece occasion they will take the opportunity to score points off their opponents. Personally I don’t have a problem with this – it is part and parcel of the democratic process.

We saw this highlighted this afternoon most notably in the announcement about the ending of the special rules for non-domiciled individuals. That has long been a flagship policy of the Labour party and the changes must have been designed at least partly to derail the opposition’s fiscal plans. Of course, like all such big announcements there is more to it than the headlines suggest: the proposals themselves might be thought to be fairly modest – with non-residents still being able to shelter foreign income from UK for four years. The key question is what impact the new regime will have on individuals’ behaviours. Will the internationally mobile still want to retain a base in the UK or will they decide that the tax burden is now too high? A lot will depend on exactly how well the transitional rules operate.  Expect a lot of debate over the coming weeks and months.

Almost everybody will welcome the proposed changes to the way that child benefit is taxed – the current system is widely perceived as ineffective and unfair. The long-term plan to tax the benefit by reference to family income does depend on HMRC having the right systems in place – something which cannot be taken for granted.  In the meantime, the raising of the thresholds will certainly help to resolve some of the problems people currently face.

The reduction in the National Insurance rate for employees and the self-employed was so widely trailed that it would have been a big shock had Mr Hunt not made the cut. The politics of this are interesting. An NI cut can be portrayed as a boost to hard working families – (are there any other sorts of families on Budget day?) but I wonder how many people can actually say with confidence what the current NIC rate is? So does a cut mean as much as a cut in the basic rate of tax, which is something almost everybody would understand.

One interesting example of spin is the announcement about the abolition of the special regime for furnished holiday letting. When this was introduced (in 1984) this was seen very much as a way of protecting the UK tourist industry but its abolition is being badged (at least in the press) as the removal of a perk for second home owners.  We have been here before. In the 2009 Budget the Labour Party announced that the FHL rules would be repealed from 2010, but this was overtaken by events when a general election was called and the incoming government decided to retain the regime. Could history repeat itself?  Notable also on property taxes was the reduction of the capital gains rate on property disposals to 24% and the abolition of the stamp duty relief for multiple dwellings – something which has been the subject of many recent tribunal cases and where there has been considerable pushing of the envelope by a number of advisers.

At first sight there doesn’t seem much for business either way other than the increase in the VAT threshold to £90,000, the Chancellor has obviously decided to leave the fundamentals of the corporation tax regime well alone after the ups and downs of the last few years.  Of course, as we work though the details of the small print during the rest of the day, we may have cause to revise that view, so make sure that you keep up to date with Tolley.

Andrew Hubbard 
Editor in Chief