The Spring Budget 2024 delivered by UK´s Chancellor Jeremy Hunt marks a significant step towards economic recovery and supporting hardworking families amidst ongoing global challenges. With the UK economy navigating through the aftermath of the COVID-19 pandemic and facing inflationary pressures driven by geopolitical events, the government has unveiled a comprehensive plan to address key priorities, including reducing inflation, fostering economic growth, and managing debt.
Economic Resilience and Growth
Despite initial forecasts predicting a recession in 2023, the UK economy has displayed remarkable resilience, with GDP growing by 0.1% and the unemployment rate remaining low at 3.8% in Q4 2023. The government’s proactive policies have contributed to this resilience, with growth expected to accelerate from the first half of 2024. Additionally, the UK is forecasted to have the third-fastest cumulative growth in the G7 over the 2024-2028 period, as per IMF projections.
Fiscal Discipline and Tax Cuts
The government remains committed to fiscal discipline, with plans on track to meet debt and borrowing fiscal rules. Notably, the Spring Budget introduces significant tax cuts aimed at supporting working people and boosting growth. Employee National Insurance contributions (NICs) will be reduced from 10% to 8%, saving the average worker over £900 per year. Similarly, the main rate of self-employed National Insurance will decrease from 8% to 6%, providing additional relief for self-employed individuals.
Support for Families and Vulnerable Households
To alleviate the burden on families facing the cost of living, the government is extending support through various measures. The Household Support Fund will receive an additional £500 million to assist vulnerable households with essential expenses such as food and utilities. Furthermore, changes to the High Income Child Benefit Charge threshold will benefit over 170,000 families, ensuring fairer treatment based on household incomes.
Investment in Public Services and Productivity
Recognizing the importance of public sector productivity, the government is unveiling plans to boost productivity levels across key sectors. Investments in the NHS will receive a significant boost, with £2.5 billion allocated to reduce waiting lists and enhance everyday services. Additionally, a comprehensive NHS productivity plan backed by £3.4 billion of funding aims to drive technological and digital transformation, unlocking substantial productivity savings.
Stimulating Investment and Innovation
The Spring Budget introduces tax breaks and investment incentives to stimulate growth in high-growth industries. Over £1 billion will be allocated to support the UK’s creative industries, including tax reliefs to lower the cost of production. Small and medium-sized businesses will benefit from a £200 million extension of the Growth Guarantee Scheme, facilitating access to finance for growth and innovation.
Fair and Modern Tax System
The government is committed to reforming the tax system to ensure fairness and simplicity. The outdated concept of domicile and remittances will be replaced with a residency-based system, ensuring equitable taxation for all UK residents. Additionally, reforms aim to make property tax systems fairer and more efficient, with measures to level the playing field between short-term and long-term lets.
In summary, the Spring Budget 2024 reflects the government’s determination to navigate economic challenges while supporting the prosperity of working families and fostering long-term growth and innovation across the UK.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity.
