Sign up for the complimentary Morning Headlines email to receive updates from our journalists around the globe.
Join our mailing list for a daily email of top news stories, completely free.
Subscribe to our complimentary daily email, “Morning Headlines”
Receive a free email every day with the latest top news stories by signing up for our mailing list.
It is anticipated that Chancellor Jeremy Hunt will unveil additional tax reductions in his upcoming spring Budget, after much anticipation surrounding the government’s future financial plans.
In addition to prime minister Rishi Sunak, Mr. Hunt has been increasing the public’s anticipation for a reduced tax load through various media appearances, considering cuts for income tax, national insurance, and potentially even inheritance tax.
Experts estimate that the government has a potential budget surplus of £15 to £20 billion available for spending, if they choose to make cuts in other areas. Considering the current demand for tax reduction initiatives and the possibility of this being the Conservative party’s final budget before an upcoming election, reducing taxes appears probable.
On March 15, 2023, Jeremy Hunt was seen with the ‘red box’ before presenting his spring Budget.
Here is a summary of what experts have shared regarding potential tax reductions in the upcoming spring Budget:
Which taxes are eligible for reduction in the upcoming spring Budget?
The Resolution Foundation (RF) economic think tank has been discussing the potential of personal tax reductions. In their preview for the spring Budget, they contemplate the possibility of a 1p decrease in income tax (resulting in a £7bn loss for the government) or a 1p reduction in national insurance contributions (resulting in a £5bn loss for the government).
An individual earning £20,000 per year would save a total of £74 per year, while someone earning £50,000 per year would save £374 annually.
On the other hand, the research institute noted that revoking the freeze on the income tax allowance for individuals, which has been implemented since 2021, would primarily aid those with lower incomes. The London School of Economics has labeled this measure as a “hidden tax” that disproportionately affects individuals with lower incomes.
On February 16, 2024, Rishi Sunak, the Prime Minister, met with Jeremy Hunt, the Chancellor of the Exchequer.
The byline reads “Paul Ellis from PA Wire”.
According to calculations, adjusting this allowance for inflation would result in a yearly savings of £252 for individuals earning £20,000 and £50,000.
There has been a suggestion that the upcoming Budget will involve a reduction in fuel tax, which is good news for drivers. This will be achieved by cancelling the previously planned 5p increase, scheduled to go into effect on March 23.
Will I see improvement in my situation after the spring Budget?
On 6 March, Mr. Hunt will probably focus on promoting his low-tax agenda; however, the Institute for Fiscal Studies (IFS) argues that it will mask a larger issue.
According to the economic research institute, the UK tax burden will reach an all-time high, regardless of any changes announced by Hunt next week.
The primary reason for this is the freeze on personal allowances. Although if the government follows through with a £7 billion decrease in income tax, they will ultimately be retracting £44 billion annually from this “hidden” growth in income tax by 2027/28, when the freeze is projected to conclude.
The Resolution Foundation has described this as a “tax-increasing sandwich,” as the expected tax increases before and after next week’s budget are expected to greatly surpass any possible cuts.
There are warnings that Mr Hunt may reduce government spending by billions of pounds in order to support tax cuts before the election. The Institute for Fiscal Studies points out that certain sectors, including the NHS, schools, and defense, may have some protection, but other sectors without protection could face significant budget cuts.
Some institutions such as local government, further education, courts, prisons, and police may experience a reduction in funding of £18 billion over a period of four years.
According to Andrew Goodwin, the chief UK economist at Oxford Economics, there are no more efficiency savings left to be made. The focus now is on deciding which services will no longer be offered.
Martin Mikloš, an economist conducting research at the Institute for Fiscal Studies, cautioned against the temptation for Mr. Hunt to reduce taxes without specifying the corresponding reductions in public spending needed to offset the costs.
The speaker stated that the government should wait to reveal any information on tax reductions until it has disclosed more information about its spending plans through a Spending Review.
Chancellor Hunt has not made a clear commitment to tax cuts at this time. He stated earlier this year that he has limited flexibility to implement such cuts compared to his 2022 autumn statement.
We cannot reword.
