The Great British Budget

A British ISA, a British Bond and a promise to make Britain the next Silicon Valley.

Not quite MAGA, more like PUKKA...Pretend UK's Kool Again.

In my post last week, I began by saying this Budget might be the government's last before the next General Election, potentially happening as early as May.

Given the lack of significant measures announced today, it may not be.

I'm now inclined to believe the election will be pushed out to October which would allow one last emergency Budget to be squeezed in.

We shall wait and see.

As for any changes, here's a distilled version of the key points you need to know:

Pensions

No changes, for once!

IHT

No changes (but see below for what’s in the post).

Income Tax

No changes.

Corporation Tax

No changes.

National Insurance

The main rate of Class 1 employee NICs will be cut from 10% to 8% starting 6 April 2024 (meaning the average worker would save about £450 a year). 

There will be an additional 2p cut to the main rate of self-employed National Insurance, reducing the main rate of Class 4 self-employed NICs from 8% to 6% (equating to a saving of about £350 a year).

Capital Gains Tax

The capital gains tax rate on non-primary residence property sales will drop from 28% to 24% for higher rate taxpayers. Remember CGT allowances halve again next tax year.

However, the lower rate will remain at 18% for any gains that fall within an individual's basic rate band.

Non-Doms

The non-UK domicile tax rules will be replaced with a residence-based regime. This measure abolishes the remittance basis of taxation for non-UK domiciled individuals.

Individuals who opt into the new regime will not pay UK tax on any foreign income and gains arising in their first four years of tax residence, provided they have been non-tax resident for the last 10 years.

This new regime will start on 6 April 2025 and applies UK-wide.

VAT Threshold Increase

Small business owners will welcome the VAT registration threshold bump from £85,000 to £90,000.

Furnished Holiday Lettings

In a surprising move, the government plans to abolish tax benefits associated with furnished holiday lettings without proposing a direct replacement.

And for consultation in the future...

Savings

A new ISA with an additional £5,000 limit, on top of the existing £20,000, for investment presumably in British business.

More on this to be announced. Single company PEPs anyone?

Oh, and there will also be a new Bond. Not Idris Elba but the British Savings Bond, available through NS&I.

Inheritance Tax (IHT)

Perhaps the most interesting of today’s announcements (in part because the current rules are so complex), are the plans to transition to a residence-based regime for IHT.

Key aspects of this transition include:

• A consultation on the best approach to implement this change, including the consideration of a 10-year exemption period for new arrivals to the UK.

• There will also be a 10-year 'tail provision' for individuals who leave the UK and become non-resident.

• This will get rid of the clumsy deemed domicile definitions and open up much needed certainty for UK nationals who wish to retire abroad.

I'm pleased to see that some of my forecasts, especially those related to National Insurance and changes to non-dom status, were accurate.

However, considering the frequent leaks preceding Budgets these days, I'll modestly acknowledge this accuracy.

If an election in October does come to pass, its timing will likely aim at giving the economy the maximum possible chance to recover, with the goal of reducing inflation further and exiting this technical recession, rather than an attempt to introduce a bribe inducing budget before the polls.