Spring Budget 2024: What we can expect vs what we need

There have been ever more strident calls for tax cuts, particularly from the Conservative party, but echoed by others, bemoaning the UK tax rate being higher than the post WW2 period.

With an election near and somewhat depressing poll ratings, Mr Hunt would dearly like to deliver a popular tax cutting budget, but does he have the room for manoeuvre, and where should he target the resources that he does have?

Is there room for tax cuts?

It does seem clear that the current tax burden is too high but with crumbling infrastructure, record debt repayments, an NHS struggling to cope with an ageing population, as well as increasing geopolitical tensions which may lead to increased military spending, what can he cut?

One line of thinking is that productivity increases leading to higher GDP is the answer, and that lower taxes encourage this – the introduction of full expensing for plant and machinery expenditure in the Autumn Statement was no doubt partly aimed at encouraging this.

Will we now see more with the headline rate of corporation tax reducing from the relatively high rate of 25%? Unlikely, but a road map leading to a staged lowering of the tax would be welcome and would encourage inward investment at a time when the UK needs all the help it can get.

Turning to personal taxes, the talk of abolishing inheritance tax has all but ceased such that change is not expected, but a reduction in the headline rate from 40% to 30% or even 20%, would make the tax far less unpopular and reduce the current disincentive for wealthy business owners to relocate to the UK. At the very least, the nil rate band below which IHT is not charged, and has been fixed at £325,000 since 2009, should now be significantly increased to at least £1m and then indexed thereafter, to prevent the absurdity of simple price increases dragging more and more modest estates into the tax.

A reduction in income tax would be popular but expensive so may be too much to hope for.

More affordable would be a reduction in SDLT which at up to 15% is punishingly high. Such a change would be popular by making houses more affordable, but also good for the economy by giving a boost to the construction sector.

How we will fund the tax cuts?

Turning now to whether the Chancellor has the funds for tax cuts, there are many voices suggesting that he has not. The IMF, the OBR among others have suggested it is unlikely he can afford tax cuts without cutting spending.

Even Mr Hunt himself is downplaying tax cuts so perhaps he agrees, or is he softening up his audience so that they remain pleasantly surprised on March 6th?

We shall find out in a few weeks’ time!

For more insights on potential measures from the Chancellor in his Spring Budget, view our full Wishlist article.