A Budget for Long Term Growth? 

A Budget for Long Term Growth? 

The Chancellor titled his 2024 budget the “Budget for Long Term Growth” and set out that debt and inflation are expected to fall.  He’s proud to put £900 back into the average worker’s pocket but –  given the rate of inflation of the last few years – I doubt that many will feel it. 

 Whilst I enjoy the theatre of the budget day announcement, it’s worth remembering that the books still need to be balanced.  The headline policy of a  2% cut in national insurance will be paid for by a combination of several targeted tax rises including reforming the non-dom regime, taxing proprietors of holiday lettings businesses in the same way as BTL investors, introducing duty on vaping and abolishing multiple dwellings relief. 

 Finally, it’s worth remembering that the effective date of many of these changes is after the next general election.  Whilst Labour is yet to fully spell out its economic agenda, it’s hard to see which of these changes they would sweep away were they to win. 

 Levelling up? Too little too late. 

 We’re used to successive chancellors tinkering around the edges; however, I take the government’s claims about the success of their ‘levelling up’ policy with a pinch of salt. Whilst Britain clearly isn’t objectively ‘poor’, British society is far from equal.  In many ways Britain is less equal than at any time since the 1970s – in 2023 the richest 50 families in the UK represented a staggering 50% of the combined wealth of the UK population, and the Joseph Rowntree foundation estimates that 22% of people in the UK live in relative poverty. 

 I’m often chided by my colleagues for being overly utopian, but I would welcome a budget that actively does more to level the playing field – I’ve been telling anyone who will listen why I think Stamp Duty is stupid, as is assessing eligibility for childcare support on the income of the highest earner not combined household income.  Not only has fiscal drag brought millions of people into the tax net, but mechanisms such as the tapered personal allowance (which was supposed to be temporary) and the High Income Child Benefit Charge (“HICBC”) seem unnecessarily punitive. 

 Britain is open for business, but HMRC do not make it easy 

 Some years ago, David Cameron announced that ‘Britain is open for Business’. The Elemental Tax and Accountancy team regularly work with non-UK businesses setting up in the UK for the first time.  In our experience, there is still much work to be done to remove the friction of setting up a business in the UK.  We welcome the reform of Companies House and the impact that will have to reduce fraud and improve the quality of data on the register.  Our hope is that there’s a similar reform of HMRC.  

 The following should be relatively easy wins: 

    1. Resource HMRC helplines so that taxpayers get the help they need when they need it.  It is not acceptable that helplines are frequently closed due to a lack of staff. 
    2. Speed up the process by which companies are registered as taxpayers.  Companies and LLPs are apparently issued Unique Tax Reference numbers (“UTRs”) upon registration.  All too often, these do not arrive in the post.  This process could be very easily digitised using the newly required registered email address. 
    3. Recognise that millions of people set up businesses virtually or from home.  Requiring a physical office space to facilitate VAT registration is an outdated policy and creates unnecessary delays in the system. 
    4. Actually make tax digital.  Quarterly reporting for landlords feels unnecessary, but so many of our interactions with HMRC are still by post and excruciatingly slow.   
    5. Respond to queries on a timely basis. It’s not unusual for HMRC to take many months to respond to correspondence.  6 months is not unusual, far longer is more common. 

 As a tax advisor, I’m regularly frustrated by the inadequacy of HMRC’s investigations into egregious (and frankly, blatantly obvious) tax evasion.  Astonishingly, they are yet to bring a single charge for the offence of failing to prevent the facilitation of tax evasion.  Thankfully, the chancellor has announced an increase in HMRC funding and hopefully some of this new funding will fund civil fraud investigations (which have halved over the last 5 years). 

  So, what changed? 

 In short, not a lot. We will be publishing further commentary on the changes that impact our clients over the following days and weeks. 

 In the meantime, the key changes are as follows:  

  • A reduction of 2% in primary class 1 and class 4 National Insurance rates. 
  • The higher rate of CGT on residential property will reduce from 28% to 24% 
  • The High Income Child Benefit Charge threshold will increase from £50k to £60k, and the rate at which HICBC applies is halved 
  • A new ‘Audio-Visual Expenditure Credit’ is introduced to support small filmmakers. 
  • A permanent extension to the higher rates of Theatre tax relief, Orchestra relief, and Museums and Galleries relief. 
  • Additional tax relief is given for expenditure on visual effects 
  • Multiple Dwellings Relief abolished 
  • Non-Dom rules replaced with a residence-based regime 
  • A new ‘UK’ ISA will be introduced to encourage investment in UK businesses 
  • The Furnished Holiday Lets regime will be abolished 
  • Full expensing for corporation tax will be extended to leased assets 
  • Energy profits levy was extended by one year 
  • Duty introduced on vaping products 
  • Alcohol and Fuel duty frozen 

 As always, please reach out to your regular Elemental contact should you wish to discuss any of the changes. 


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