A rather underwhelming pre-election Budget

By Mike Chapman, Knill James Tax Partner

Not surprisingly, the last Conservative Government Budget ahead of a General Election appears to be rather underwhelming. Much play was made in the media before the Budget Statement of possible pre-election handouts, but Jeremy Hunt's 'fiscal headroom', the economic case for tax cuts, has remained limited. Unlike at the time of the Autumn Statement, growth predictions for the UK economy have faltered and national debt levels remain stubbornly high.

Even so, any tax cuts that the Chancellor was able to announce in the Budget would only partly offset the huge increase in tax revenues as a proportion of national income that the Treasury has enjoyed over the current Parliament. Despite the reduction to National Insurance announced in the Autumn Statement, it's been estimated that the taxes collected in 2023/24 will be some £66 billion higher than they would have been had the proportion of tax to national income remained in line with that of five years ago. Somewhat ironic given the Chancellor's repeated assertion in his Budget address that he was a cutter of taxes!

The bulk of this increased tax take has been brought about by the impact of Fiscal Drag – the freezing or lowering of tax allowances & thresholds in wage inflationary times, bringing more of the population into the tax net or putting them into higher rates for the first time. There was no mention in the Budget of any changes to the Income Tax Personal Allowance and Basic Rate band so these will remain frozen until 5 April 2028, subject of course to what any future Government might do.

So, given the various limitations, what were the stand-out fiscal measures announced?

National Insurance reductions

As widely trailed in advance, the main rate of employee NICs has been reduced from 10% to 8% and, in parallel, self-employed Class IV NICs will fall from 8% to 6%. Both changes will be effective from 6 April 2024. Together these measures will cost the Exchequer some £10 billion per year and the impact per worker will be a saving of over £900 per annum. Employers' NIC rates will remain unaffected.

Non-Domicile Tax

In an obvious nod to Labour's stated intentions if elected, the Chancellor acknowledged the tension between encouraging overseas high net worth individuals to continue to invest in the UK, while ensuring that they pay a fair amount of tax. The Chancellor has indicated that the current system will be abolished, and the concept of domicile will be removed from UK tax legislation. Commencing on 6 April 2025, the new regime will include transitional arrangements for existing non-dom taxpayers but will keep non-UK income and gains tax free for new arrivals for the first four years of their UK tax residence.

Child Benefit High Income Charge

The perceived unfairness of the Child Benefit High Income Charge becoming repayable based on individual rather than household earnings was acknowledged and will be subject to a wider review. In the meantime, the tapering threshold has been increased to £60,000 and Child Benefit becomes fully repayable when the higher earner receives £80,000 per annum.

Furnished Holiday Lettings

In a surprise move, Jeremy Hunt has announced the abolition of the Furnished Holiday Lets regime from 6 April 2024. Subject to various conditions, the regime permitted landlords to treat such lettings as a trade and therefore be able to access advantageous tax treatments regarding capital allowances and capital gains, as well as treating the profits as earnings for pension purposes.

Residential Property Gains

In a further surprise move, the higher 28% CGT rate on the sale of residential property is reduced to 24%. This will assist landlords who have been coping with higher mortgage rates of late but will also help to stimulate the residential market through increased property sales activity. Somewhat counter-intuitively, the reduction in the CGT rate is expected to increase the tax take with an anticipated rise of £660 million in tax revenues over the next two years.


With the Chancellor's room for manoeuvre restricted by the current economic outlook and with an election likely this calendar year, it is hardly surprising that the more significant tax-cutting measures were targeted to individual taxpayers. As everyone knows, companies don't vote!

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