Budget 2024: Chancellor abolishes ‘non-dom’ tax breaks – and confirms national insurance will be cut by 2p
The chancellor has said that the current tax system for non-doms will be abolished – and confirmed a 2p cut to national insurance.
In the budget, Jeremy Hunt said “permanent cuts in taxation” were possible because of the progress made in bringing down inflation – with forecasts suggesting it will fall to the target level of 2% within months.
Scrapping the “non-doms” regime, which allowed certain wealthy individuals to avoid paying tax on their foreign income, is expected to raise £2.7bn a year.
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Mr Hunt spoke about cutting taxes to increase growth, and the official Office for Budget Responsibility (OBR) forecast predicted that living standards will grow faster than expected.
But real disposable household disposable income is not expected to recover to pre-pandemic levels until the 2025-26 period, after the next election.
And the tax burden is also set to continue to rise – albeit at a slightly reduced level when compared to last autumn’s forecast.
In total, the government will take £19.7bn more in tax by 2029 than forecasted in March 2021, even when the cuts to national insurance are included, due to fiscal drag.
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In terms of spending, Mr Hunt earmarked almost £6bn for the NHS – with artificial intelligence set to be used to “cut form-filling for doctors” in a digitisation drive.
A 5p cut to fuel duty will be extended for another 12 months – with the government “backing the Great British pub” by holding the price of beer, wine and spirits steady until February 2025.
Meanwhile, Britons will be able to invest up to £5,000 in UK companies tax-free – in addition to their current ISA allowance – through a new “British ISA”.
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Chancellor cuts national insurance in budget
He also announced:
• The High Income Child Benefit Charge threshold will increase from £50,000 to £60,000
• A new excise duty on vaping, as well as a one-off increase to tobacco duty
• The higher capital gains tax rate on property will fall from 28% to 24%
• The VAT registration threshold will rise from £85,000 to £90,000 from 1 April – the first increase in seven years
• A fund aimed at supporting vulnerable households with the cost of living will be extended by a further six months
• The UK economy is expected to grow by 0.8% this year – and 1.9% in 2025
• Hundreds of millions of pounds to tackle “historic underinvestment in our nations and regions”
The 2p cut to national insurance was widely trailed – and follows a previous 2p cut announced in the autumn statement. Combined, this could save the average worker up to £900 a year.
But the chancellor had faced calls from Tory MPs to cut income tax or unfreeze tax thresholds to prevent Britons from being dragged into higher bands when they get pay rises.
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Mr Hunt is already facing anger from Scottish Conservatives, after he announced an extension of the windfall tax on profits made by energy companies in the North Sea.
The leader of the Scottish Tories, Douglas Ross, said he would not vote with the legislation – implying he would either oppose or abstain on the motion to introduce the measure.
Andrew Bowie, a Tory minister, said the will be “working with” Mr Ross to “resolve” the matter.
Labour leader Sir Keir Starmer said the budget was “bereft of ideas”.
This budget is set to be the last before the election – with Mr Hunt under pressure to revive economic growth and the government’s prospects at the ballot box.
The UK economy slipped into a technical recession at the end of last year, and the Tories are about 20 points behind in the opinion polls.
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Before the budget was announced, shadow chancellor Rachel Reeves said: “The Conservatives promised to fix the nation’s roof, but instead they have smashed the windows, kicked the door in and are now burning the house down.
“Taxes are rising, prices are still going up in the shops and we have been hit by recession. Nothing the chancellor says or does can undo the economic vandalism of the Conservatives over the past decade.”
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Politics
Row over how many farms will be affected by inheritance tax policy – as PM doubles down ahead of farmers protest
Sir Keir Starmer has insisted the “vast majority of farmers” will not be affected by changes to Inheritance Tax (IHT) ahead of a protest outside parliament on Tuesday.
It follows Chancellor Rachel Reeves announcing a 20% inheritance tax that will apply to farms worth more than £1m from April 2026, where they were previously exempt.
But the prime minister looked to quell fears as he resisted calls to change course.
Speaking from the G20 summit in Brazil, he said: “If you take a typical case of a couple wanting to pass a family farm down to one of their children, which would be a very typical example, with all of the thresholds in place, that’s £3m before any inheritance tax is paid.”
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The comments come as thousands of farmers, including celebrity farmer Jeremy Clarkson, are due to descend on Whitehall on Tuesday to protest the change.
And 1,800 more will take part in a “mass lobby” where members of the National Farmers’ Union (NFU) will meet their MPs in parliament to urge them to ask Ms Reeves to reconsider the policy.
Speaking to broadcasters, Sir Keir insisted the government is supportive of farmers, pointing to a £5bn investment announced for them in the budget.
He said: “I’m confident that the vast majority of farms and farmers will not be affected at all by that aspect of the budget.
“They will be affected by the £5bn that we’re putting into farming. And I’m very happy to work with farmers on that.”
Sir Keir’s spokesman made a similar argument earlier on Monday, saying the government expects 73% of farms to not be affected by the change.
Environment, Farming and Rural Affairs Secretary Steve Reed said only about 500 out of the UK’s 209,000 farms would be affected, according to Treasury calculations.
However, that number has been questioned by several farming groups and the Conservatives.
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The NFU said the real number is about two-thirds, with its president Tom Bradshaw calling the government’s figures “misleading” and accusing it of not understanding the sector.
The Country Land and Business Association (CLA) said the policy could affect 70,000 farms.
Conservative shadow farming minister Robbie Moore accused the government last week of “regurgitating” figures that represent “past claimants of agricultural property relief, not combined with business property relief” because he said the Treasury does not have that data.
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Agricultural property relief (APR) currently provides farmers 100% relief from paying inheritance tax on agricultural land or pasture used for rearing livestock or fish, and can include woodland and buildings, such as farmhouses, if they are necessary for that land to function.
Farmers can also claim business property relief (BPR), providing 50% or 100% relief on assets used by a trading business, which for farmers could include land, buildings, plant or machinery used by the business, farm shops and holiday cottages.
APR and BPR can often apply to the same asset, especially farmed land, but APR should be the priority, however BPR can be claimed in addition if APR does not cover the full value (e.g. if the land has development value above its agricultural value).
APR and BPR can apply to farmland, which the Conservatives say has been overlooked by the Treasury in compiling its impact figures. File pic: iStock
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Mr Moore said the Department for the Environment, Farming and Rural Affairs (DEFRA) and the Treasury have disagreed on how many farms will be impacted “by as much as 40%” due to the lack of data on farmers using BPR.
Lib Dem MP Tim Farron said last week1,400 farmers in Cumbria, where he is an MP, will be affected and will not be able to afford to pay the tax as many are on less than the minimum wage despite being asset rich.
Politics
Cabinet split over assisted dying as Education Secretary Bridget Phillipson latest to reveal she will vote against bill
A split is emerging in the cabinet, with Education Secretary Bridget Phillipson revealing she will join several of her colleagues and vote against the bill to legalise assisted dying.
Ms Phillipson told Sky News she will vote against the proposed legislation at the end of this month, which would give terminally ill people with six months to live the option to end their lives.
She voted against assisted dying in 2015 and said: “I haven’t changed my mind.
“I continue to think about this deeply. But my position hasn’t changed since 2015.”
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Details of end of life bill released
MPs will be given a free vote on the bill, so they will not be told how to vote by their party.
The topic has seen a split in the cabinet – however, Prime Minister Sir Keir Starmer has yet to reveal how he will vote on 29 November.
Ms Phillipson joins some other big names who have publicly said they are voting against the bill
These include Deputy PM Angela Rayner, Health Secretary Wes Streeting, Justice Secretary Shabana Mahmood and Business Secretary Jonathan Reynolds.
Border security minister Angela Eagle is also voting against the bill.
Senior cabinet members voting in favour of assisted dying include Energy Secretary Ed Miliband, Science Secretary Peter Kyle, Work and Pensions Secretary Liz Kendall, Culture Secretary Lisa Nandy, Northern Ireland Secretary Hilary Benn, Transport Secretary Louise Haigh and Welsh Secretary Jo Stevens.
The split over the issue is said to be causing friction within government, with Sir Keir rebuking the health secretary for repeatedly saying he is against the bill and for ordering officials to review the costs of implementing any changes in the law.
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Health Secretary Wes Streeting has called for a cost report into assisted dying. Pic: PA
Sky News’ deputy political editor Sam Coates has been told Morgan McSweeney, the PM’s chief of staff, is concerned about the politics of the bill passing.
He is understood to be worried the issue will dominate the agenda next year and, while he is not taking a view on the bill, he can see it taking over the national conversation and distracting from core government priorities like the economy and borders.
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Details of the bill were published last week and include people wanting to end their life having to self-administer the medicine.
It would only be allowed for terminally ill people who have been given six months to live.
Two independent doctors would have to confirm a patient is eligible for assisted dying and a High Court judge would have to give their approval before it could go ahead.
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