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The Chancellor managed to find enough wiggle room in the deteriorating economic forecasts to announce a further 2% cut to national insurance as the government gears up for a general election later this year.

 

Jeremy Hunt was able to scrape together the money to make the national insurance (NI) cuts by announcing revenue-raising initiatives such as abolishing the non-dom tax status, abolishing the furnished holiday lettings relief (FHL), abolished multiple dwellings relief on SDLT, introducing a duty on vapes and extending the windfall levy on oil and gas companies.

 

While a lot of the contents of the Budget were leaked ahead of the speech, the one rabbit that the Chancellor saved to pull out of the hat in the House of Commons was his plans to reform the high-income child benefit charge (HICBC).

 

And in the first increase in seven years, Hunt also increased the VAT threshold from £85,000 to £90,000 from 1 April. “That will bring tens of thousands of businesses out of paying VAT altogether, encouraging people to invest in growth.”Hunt may have pulled out some tax cuts, but he did so under circumstances that he didn’t anticipate at the time of the Autumn Statement when he was handed a £26bn windfall to play with. It was a different story today, with Hunt’s so-called headroom diminished to around £13bn.

 

With the general election looming, the personal tax cuts will give the Conservative backbenchers something to take door-to-door, while abolishing the non-dom tax status pulls the rug out from underneath the Labour Party, who had planned on removing the tax status to fund public sector reforms.

 

Tax measures

 

Among the tax measures announced in the Spring Budget were:

2% cut to the main rate of income tax from 10% to 8%

Self-employed NI cut from 8% to 6%

Abolished multiple dwellings relief on SDLT

Reduced the higher rate of capital gains tax (CGT) on property sales from 28 to 24%

VAT threshold increased to £90,000

Reformed the high-income child benefit charge

Introduced brand-new ISA which allows an additional £5,000 annual investment

Abolished furnished holiday lettings relief

Abolished the non-dom status

Introduced duty on vaping products from October 2026 plus one-off

Frozen the fuel duty for the 14th year in a row for another 12 months, maintaining the 5p cut

Extended the alcohol duty freeze until February 2025

Made tax reliefs for orchestral productions permanent

£1bn in additional tax relief for creative industries over the next five years

Extended the windfall tax on oil and gas.

 

Personal tax cuts

 

The 2% cut to the main rate of NI comes after rumours that, confronted with scarce resources, the Chancellor and the prime minister were deliberating whether to cut NI again or income tax.The prime minister’s preferred option was to cut income tax, after pledging in his last Budget that he was going to cut the basic rate from 20% to 19% by 2024. However, they opted to repeat the same 2% NI cut that was announced in the Autumn Statement.

 

The decision to go with national insurance rather than income tax may just come down to cost. A 1% cut in income tax comes at the price of £7bn while the same cut in national insurance is £4.5bn.

 

The national insurance cut in the Autumn Statement came into force in January and going by today, Hunt wants more cuts to come. “Our long-term ambition [with national insurance] is to end this unfairness when it is responsible when it can be achieved without increasing worry when it can be delivered without compromising high-quality public services. We will continue to cut national insurance as we have done today.”

 

Hunt was able to afford this NI tax giveaway through a number of revenue-raising announcements, such as targeting short-term holiday lets and the non-dom tax status.

 

Furnished holiday lettings and property

 

The FHL announcement came as a shock when it was leaked over the weekend and also poses significant change for accountants to grapple with. As raised by Caroline Miskin from the Institute of Chartered Accountants in England and Wales (ICAEW) tax faculty, the change would make Making Tax Digital for income tax self assessment (MTD ITSA) easier to design but could lead to disputes over whether there is a property trade.

 

Hunt reasoned this change, arguing that it would help alleviate the strain of housing in coastal areas where landlords are snapping up properties and converting them to holiday lets.

 

“This tax regime is creating a distortion, meaning there are not enough properties available for long-term rental. So to make the tax system work better for local communities, I have abolished the relief.”

 

In other property tax announcements, Hunt abolished the multiple dwellings relief on SDLT and in a swipe at Labour’s deputy leader, he reduced the higher rate of CGT on property sales from 28 to 24%.

 

Non-dom status

 

The other revenue raiser was abolishing the non-dom tax regime. This had long been one of the Labour Party’s Ace cards.

 

“After looking at the issue for many months, I can introduce a system that is fairer and competitive with other countries. The government will abolished the current system for non-doms and we will replace the non-regime with a modern, simpler and fairer residency.

 

New arrivals from April will not be required to pay tax on foreign income and gains for their first four years. Those that continue to live in the UK will pay the same tax.

 

The non-dom tax regime has long been a thorn in the side of the prime minister after it emerged in April 2022 that his wife, Akshata Murty, had this status. She has since relinquished this status, but for a while, Rishi Sunak was accused of having a conflict of interest as this particular tax regime remained untouched.

 

High-income child benefit charge

 

The Chancellor has come under pressure from all directions to address some of the more unfair aspects of the charge, which has now become a regular feature in the first tier tax tribunals.

 

Hunt said he was going to “end that unfairness” of the HICBC but warned that it requires “significant reforms to the tax system, including allowing HMRC to collect household-level information”.

 

He said the government will consult on moving the HICBC to a household-based system by April 2026. Because that is not quick enough, from April the HICBC will be raised from £50,000 to £60,000. Hunt said this will take 170,000 families out of the regime.

 

Business investment

 

The Spring Budget didn’t have a tentpole announcement for businesses like the Autumn Statement had in making full expensing capital allowance scheme permanent.

 

However, Hunt did extend the recovery loan scheme and renamed it as the growth guarantee scheme, which he said would help 11,000 small or medium-sized enterprises (SMEs) to access funding.

 

“Small businesses being able to access the finance they need to grow and invest is crucial if we’re to grow our economy.

 

”Hunt also announced that he was going to “reduce the administrative and financial impact” for small businesses and increase the VAT threshold to £90,000. The VAT threshold had been frozen to April 2026.

 

As has been the case in the past fiscal statements, investment zones made an appearance. This time Hunt revealed that the first investment zones in the North of England and the Midlands will be launched in April.

 

Economy

 

The Chancellor started his speech by focusing on the economy. “When the PM and I came to office inflation was 11%, but the latest figures now show it as 4%,” he said.

 

He said the latest figures from the Office of Budget Responsibility (OBR) show inflation falling below the 2% target “in just a few months’ time – nearly a whole year earlier than forecast”.

 

Hunt said the OBR expects the UK economy to grow by 0.8% this year, then 1.9% next year, which is 0.5% higher than the autumn forecasts. The OBR also forecasts debt to fall to 94.3% of GDP by 2028/29.

 

“Growth has been higher than every European economy, unemployment has halved and there are 800 more people in jobs for every single day we’ve been in office.

 

“Because we are delivering the prime minister’s economic priorities, we can now help families not just with temporary costs of living but with permanent cuts in taxation.”