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UK Spring Budget Brief

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Today, the Chancellor of the Exchequer, Jeremy Hunt, laid out his Spring Budget to Parliament, outlining tax cuts, changes to childcare, investment in nuclear energy and spending plans. The Chancellor said that in the midst of “challenging economic headwinds”, the ongoing war in Ukraine and in the Middle East, and the cost-of-living crisis, the UK government are doing more for businesses and families than ever before.

With a General Election expected this year, the budget had all the hallmarks of a Government gearing up for a tough battle ahead. Referencing marginal seats and name checking the Liberal Democrat leader Sir Ed Davey, who was in the Chancellor’s constituency yesterday, it has all the hallmarks of a Budget constructed with the General Election very much front of mind.

What was in the Spring Budget?

The Chancellor said that the current Government has been proficient in dealing with the struggles of a pandemic, a financial crisis and an energy crisis that has rocked the world due to ongoing wars and political instability. He called the budget one for “long term growth” and said that “we can now help families not just with temporary cost of living support but with permanent cuts in taxation.” In their summation of the state of the economy the Office for Budget Responsibility (OBR) said that it expected the economy to grow by 0.8% this year and 1.9% next year, which is 0.5% higher than their autumn forecast.

The Budget included cuts to National Insurance, an extension of the energy windfall tax, a freeze on alcohol duty and an increase in the VAT threshold, among other things outlined below.

What was in it for Northern Ireland?

With the Assembly restored and the Executive reformed, the budget will fall short of the funding that the parties have been campaigning heavily for ever since restoration.

Although the Executive is to receive around £100 million additional funding through the Barnett formula, on top of the significant £3.3 billion spending settlement within the financial package confirmed last month, this may still not be enough to fill the gap in the public purse, especially in areas such as health and public sector wages.

The Secretary of State for Northern Ireland, Chris Heaton-Haris welcomed the budget and said that the £2m set aside for global investment and trade will “build on the successful NI Investment Summit held in September 2023” and enhance ‘opportunities to showcase its (NI’s) innovation and technological strengths.’

Measures

Taxes and Benefits

·        The chancellor has said that inflation is down from 11% to 4% and that it will fall below the target to 2%.

·        On fuel, the “temporary” 5p cut will remain which means that it will stay at 53p per litre. He says this will save average car drivers £50 next year.

·        There was help for small businesses as the Chancellor increased the threshold on VAT registration from £85k to £90k; the first increase in 7 years.

·        A “British” ISA was announced that will come in the form of an extra £5,000 tax-free allowance for the public to invest exclusively in UK.

·        National Insurance will be cut from the 6th April, reducing the rate by 2p, which will be worth around £450 a year for someone on an average salary.

·        There will be a scrap on tax breaks which make it more profitable for second homeowners to let out their properties to holiday makers rather than to long-term tenants to rent.

·        Stamp duty relief for people buying more than one dwelling is being abolished.

·        The higher rate of property capital gains tax is to be reduced from 28% to 24% from April 2024. He says the move is predicted to increase revenues as there will be more transactions.

Energy

·        The Chancellor said that he'd like the UK to lead the global race in developing cutting-edge nuclear technologies, and announced the Great British Nuclear will begin the next phase of the Small Modular Reactor selection process, with companies now having until June to submit their initial tender responses.

·        £270 million for new car and air projects for zero emission vehicles in the advanced manufacturing industries, citing this will grow "zero emission vehicle and clean aviation technology".

·        The UK’s windfall tax on the profits of oil and gas companies will be extended until March 2029. The chancellor says that it will raise a further £1.5bn. "Because the increase in energy prices caused by the Ukraine war is expected to last longer, so too will the sector’s windfall profits."

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

Childcare

·        He said he will consult on a new rule to make the benefit to apply to collective household income, rather than on an individual basis, which he aims to introduce by April 2026.

·        On child benefits, he announced the threshold for child benefit will go up from £50,000 to £60,000, and at the point at which it is withdrawn will go up to £80,000.

·        Regarding childcare providers, he announced a guarantee on the rates that will be paid to childcare providers to deliver the government's "landmark offer" for children over nine months old for the next two years.

Air Passenger duty

·        There is an increase in Air Passenger Duty (APD) for business class travellers.

 Excise Duties

·        An extension to alcohol duty freeze to February 2025 was also announced.

·        There will be a new levy on vaping and a slight increase in tobacco duty.

Entertainment Industry

·        New tax credit for UK independent films.

·        There will be £26m given to the national theatre to update stages.

·        The Chancellor said that “We have become Europe’s largest film and TV production centre’. He went on to say, at the current rate of expansion, the ‘UK will be second only to Hollywood globally by the end of 2025.”

Non-Doms

·        The government has announced it will scrap and reform the tax break for wealthy foreign residents in the UK who have non-domiciled tax status. The chancellor said today that it will make the system "fairer and competitive". It will be replaced with a "modern residency system."

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