The UK Budget 2024 was primed to be an important event in the financial calendar. Industry professionals huddled around, waiting for that one policy announcement that would forever change the face of financial planning. It wasn't to be!
In past budgets, income tax rates were slashed, mortgage and pension tax reliefs disappeared or were reduced, and Qualifying Life Assurance policies were replaced by exciting new products such as PEPs and ISAs, Enterprise Investment Schemes, and other innovative ways to encourage investment in UK companies. The list goes on. These events were important, though, and did change the financial landscape.
The UK Budget 2024 appeared to be much more significant from a political perspective. Cheers and jeers from both sides of the house replaced the usually rather austere proceedings. Believe it or not, the budget speech used to be listened to respectfully by government and opposition protagonists alike. The Speaker didn’t have to keep repeating ‘Order, Order’ until their voice gave up.
Of course, the elephant in the room was the impending general election. The Leader of the Opposition even suggested May 2nd as a possible date, but we know that won’t be it!
No change to Income Tax rates or thresholds is a relative tax increase (fiscal drag), particularly during high inflation. Still, a reduction in National Insurance rates offset that.
As usual, the Chancellor gives with one hand and takes away with the other. Either way, like all countries in the Western world, someone very clever will have to find a solution to the demographic timebomb which is slowly exploding around us. The question of how we will look after older people in the future remains unanswered. Increasing tax further is the obvious solution, but it represents political suicide for the party brave enough to do it.
There's not much in it for pensioners, although at least the triple lock survived to fight another day.
Growth forecasts were encouraging. The Office of Budgetary Responsibility proved once again that its forecasting models aren’t that accurate. There is good news on inflation, which is expected to fall to the Bank of England target of 2% before the end of the year.
Television pundits expected a rabbit out of the hat moment, but it didn’t happen. Maybe that was just a ruse to keep us on their channel!
There were a few minor surprise announcements. The Chancellor stole the emperor-elect’s clothes by introducing the removal of the much-maligned ‘Non-Dom’ status. This is not a seismic event as it won’t come into force until April 2025, and those affected will have four years to find new ways to minimise their tax bills. Perhaps a move to Spain or Portugal? Both countries have particularly attractive tax regimes for internationally mobile people who prefer 320 days of sun per year to 320 days of rain.
Holiday lets were also under fire. In a nod to the past, mortgage interest relief was abolished, so those borrowing to rent properties to tourists or have a bolthole by the sea will have to pay for it without government assistance.
Of course, as most of these properties are purchased without the need to borrow, few will be affected, and those that are can probably afford it.
Some may sell their second homes and take advantage of the reduced Capital Gains Tax on disposals. The rate was changed from the current 28% to 24%. Will this persuade landlords and rentiers to release property onto the market? Doubtful to any great extent. I believe the vast majority will leave things as they are for the time being and wait for a future Chancellor to change the system radically in their favour.
No surprises in the UK Budget 2024
There was more tinkering around the edges, but no zingers or rabbits out of hats. Hardly surprising, though. We’ve all seen what happens when a bright young thing takes a torch to the tax system and crashes the economy.
Overall, it was a bit of a damp squib. Possibly the most interesting part was what wasn’t said. Neither of the main parties commented on potential cuts to public services that may be needed to relieve the country from its stubbornly high national debt.
If you want to learn more about the UK Budget 2024 and how it affects you, please get in touch.
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