Jeremy Hunt paves way for summer election with tax cuts

Combined with a 2p cut in last November’s autumn statement, the change means the average worker will pay £900 less next year in NICs. 

With self-employed NICs cut from 8 to 6%, the average saving to around 2m self-employed workers will be £650 in 2024/25.

In Scotland, more than 2.4m workers will see an average cut of £680 in NICs.

Mr Hunt told MPs: “That means the average earner in the UK now has the lowest effective personal tax rate since 1975 and one that is lower than in America, France, Germany or any G7 country.”

However many workers will see most or all of these savings wiped out by the freezes in income tax thresholds on both sides of the border.

The Chancellor also announced the abolition of the “non-dom” tax break for UK residents with foreign income, which had been a key plank of Labour’s election planning.

The move is expected to raise up to £2.7billion a year by 2028/29.

Amid noisy scenes in the Commons, Mr Hunt extended the freeze on alcohol duty by six months to February 2025 and the 5p cut to fuel duty by a further 12 months.

He also changed the way child benefit is treated, with the individual earnings threshold at which it is taxed up from £50,000 to £60,000 in April, with people getting some help until they earn £80,000.

He cut the top rate of capital gains tax on property sales – arguing that reducing it from 28% to 24% would bring in more money because of increased activity.

Mr Hunt also infuriated the Scottish Tories by extending the windfall levy on energy company profits, despite Douglas Ross making opposition to it a key part of his election plans.

The 75% levy was due to end in 2028, but Mr Hunt extended it to 2029 to raise £1.5bn.

Mr Ross, who has warned Labour’s plan to raise the tax to 78% until 2029 could cost 100,000 jobs, said on Saturday that any extension would be an “unacceptable blow”.

He now has to explain to the voters of the North East, where the Tories are defending three of their seven seats, why the Chancellor appears to have ignored him.

The Scottish Tory leader said the decision was “deeply disappointing” and he would not vote for it, creating a possible split in the Scottish Tory group at Westminster.

The Office for Budget Responsibility forecast inflation would fall to almost the 2% target this year, and growth would be higher than previously expected, although still anaemic.

The OBR forecast growth of 0.8% in 2024, up from its 0.7% forecast in November. 

Underlying debt is forecast to be 91.7% of GDP this year, increasing to 92.8% next year.

“Because we have turned the corner on inflation, we will soon turn the corner on growth,” Mr Hunt said.

To help small business, Mr Hunt increased the threshold at which firms have to register for VAT from £85,000 to £90,000, the first rise in seven years.

Read more: Scotland's largest global food and drink trade event held in Edinburgh

Douglas Ross 'deeply disappointed' by Hunt windfall tax extension

Budget 2024 OBR numbers tell different tale to Jeremy Hunt

To encourage investment in home-grown companies, he confirmed a new British ISA would allow an extra £5,000 of tax-free investment each year provided it was in UK assets.

A new levy on vaping products will start in October 2026, with the charge based on the amount of nicotine present, increasing the cost of some vaping liquids by £3 per 10ml bottle. 

Tax on tobacco will also increase, with Mr Hunt saying this would maintain the “financial incentive to choose vaping over smoking”.

Accusing Labour of having no plans on the economy, Mr Hunt said his budget would “unleash people power” and set the country “back on a path to lower taxes”.

There is speculation that the early implementation of the changes and separate plans to fast-track legislation on the Rwanda asylum plan point to an early election.

One possible day would be May 2, to coincide with council elections south of the border.

Sir Keir Starmer said only Labour offered genuine change and called for a May 2 vote, although Labour is privately predicting June.

Experts said the budget would have little effect on the nation’s finances and would be a “sour” legacy for an incoming Labour government if Sir Keir replaced Rishi Sunak in No10.

The Institute for Fiscal Studies (IFS) and the Resolution Foundation both highlighted how taxes were still going up and living standards still falling since 2019.

IFS director Paul Johnson said it was a traditional “smoke and mirrors” budget, with tax revenues being 3.9% of national income higher than they were before the Covid pandemic.

He said: “This remains a Parliament of record tax rises. While the OBR got a little more positive in its projections, the picture on living standards also remains dismal.

“On average, households will be worse off at the time of the next election than they were at the last, following nugatory real earnings growth.”

Torsten Bell, chief executive of the Resolution Foundation, added: “Britain remains a country where taxes are heading up not down - rising by the equivalent of £3,900 per household - and where incomes are set to remain below their level at the last general election when voters return to the polls.

“The tax cuts announced to sweeten the Government’s election pitch rely on the prospect of a sour £19bn of post-election tax rises, and the fiscal fiction that another £19bn of cuts to public services can be delivered in a spending review that the Treasury today confirmed will not take place until after polling day.”

Mr Johnson added: “Whoever is Chancellor at the time of the next spending review… might wish they’d chosen a different line of work.”

Labour admitted it would have to “adapt” its spending plans after Mr Hunt stole some of its clothes on extending the energy windfall levy and scrapping non-dom status.

Sir Keir said Mr Hunt’s decision on non-doms, after long defending the tax break, was “a desperate move” after “years of resistance”.

He said: “Has there ever been a more obvious example of a Government that is totally bereft of ideas? And if they’re sincere in support of this policy now, then the question they must answer today is why did they not do it earlier? Why did they not stand up to their friends, their funders and their family?

“If they had followed Labour’s example, 3.8m extra operations would have taken place by now, 1.3m emergency dental appointments, free breakfast clubs for nearly 4.5m children. But if this is just another short-term, cynical political gimmick, what is the point of them?”

Extra spending on the NHS and councils in England means almost £300m extra for Holyrood next year under the Barnett formula, but there was no more for capital investment or funding known as “financial transactions”, which was used in previous years to build social housing.

SNP finance secretary Shona Robison criticised the budget as a betrayal of public services.

The Chartered Institute of Taxation said the differing income tax regimes on either side of the border meant Scottish workers would be at most £23 better off than their English counterparts in 2024/25.  

All Scots earning more than £28,867 will pay more income tax than their southern peers, around £1,540 more next year for those earning £50,000 and £3,340 more for those on £100,000.

Sean Cockburn, of the CIOT, said: “Cutting National Insurance rather than income tax means the Chancellor can say his decisions on personal taxes benefit taxpayers across the UK. Had he chosen to cut income tax in England, this would have resulted in further divergence with Scotland.

“This reduction means that compared with the current tax year, taxpayers will pay up to £1,320 less in National Insurance in 2024/25.

“In the coming year, Scottish taxpayers with income of up to £112,900 will pay less in tax and NI combined than they have in the current tax year. But those with earnings above £28,867 will pay more tax and NI than someone with the same level of earnings in the rest of the UK, because of higher rates of Scottish income tax."