Chancellor trims National Insurance in pre-election Budget

6th Mar 2024 11:25

(Sharecast News) - The chancellor of the exchequer cut National Insurance and pledged to overhaul the tax regime for non-domiciled residents on Wednesday, in what was likely his last Budget before the next general election.

Both measures were widely trailed ahead of Jeremy Hunt addressing the House of Commons. Abolishing non-dom tax status was also a key Labour policy.

Hunt, who first cut National Insurance by 2p for employed workers in the autumn statement, said there would be a further 2p reduction from April.

The move would save an additional £450 per year for the average employee, he told MPs.

However, tax thresholds were left unchanged. A number of income tax thresholds have been frozen since 2021, despite surging inflation.

Labour leader Keir Starmer responded: "The highest tax burden in 70 years - that is their record. Give with one hand and take even more with the other, and nothing they do between now and the election will change that."

People who live in the UK but claim non-domiciled resident status currently do not have to pay UK tax on overseas earnings for up to 15 years.

Hunt said he would replace the often-controversial regime with "a modern, simpler and fairer residency-based system".

From April 2025, people who settle in the UK from overseas will not be required to pay tax on overseas income for four years, after which they will "pay the same tax as other UK residents".

Hunt told the House that the move would raise £2.7bn a year by the end of the forecast period.

The chancellor stressed that the UK, which has been hit hard by the pandemic, geopolitical unrest, record inflation, higher interest rates, soaring energy bills and a cost-of-living crisis, was now turning a corner.

"Since 2010 growth has been higher than every large European economy, unemployment has halved, absolute poverty has gone down and there are 800 more people in jobs for every single day we've been in office," he said.

According to the Office for National Statistics, the UK is currently in a technical recession, after it failed to grow for two successive quarters.

Hunt said the Office for Budget Responsibility was now forecasting GDP to grow by 0.8% this year, and 1.9% next year.

However, that is only marginally higher than the OBR's previous forecast, made at the autumn statement, for growth of 0.7% in 2024 and 1.4% in 2025.

The OBR also forecast inflation would fall to below 2% "in a few months' time", nearly a year earlier than previously forecast. Inflation currently stands at 4%, down from a peak of 11.1% in October 2022.

Hunt told MPs: "That didn't happen by accident."

Accusing the opposition benches of having "no plan", he concluded: "We today put this country back on the path to lower taxes.

"Growth up, jobs up, taxes down. I commend this statement to the House."

Other measures included extending the freeze on both fuel and alcohol duty, and cutting the higher rate of capital gains tax on residential property to 24% from 28%.

The child benefit salary threshold was also extended, to £60,000 from £50,000.

The chancellor also reiterated a previous commitment to increase public spending by 1% in real terms a year from 2025-26.