In November of last year, Jeremy Hunt announced what could be considered the biggest set of tax cuts in recent history as part of his autumn statement. And even though it is still fresh in our minds, he is already on course to announce another one on March 6th. This will make it one of the earliest budget announcements since records began, with only a few exceptions in the British financial year. Given this upcoming Spring Budget, many are wondering what to expect from the 2024 fiscal year.
Tax Cuts in 2024
1p The Basic Rate of Income Tax Cut
In light of the recent tax cuts announced by Jeremy Hunt, many are anticipating another set of changes to be announced in the upcoming Spring Budget for 2024. One area that is expected to see some adjustments is income tax.
In the Spring Budget last year, the chancellor made his intentions to cut income tax known for the long term and according to many think tanks that time is now.
The basic rate of income tax may be cut from 20% to 19%, the 1p tax cut costs around £7bn to the government. It`s considered to be a generous tax cut as well as the biggest ammunition in Jeremy Hunt`s sleeves before a possible general election in May. If the chancellor wants it worked, the change should come into effect ASAP.
Inheritance Tax Cut
Arguably one of the most unfairly high tax brackets in the UK, hence the most disliked.
Currently, inheritance tax in the UK is set at 40% for estates over £325,000 in England and Wales. However, there have been talks of dropping this rate to 25%, following a similar model as other countries such as France and Italy.
The portion of the drop is to have huge effects on the estate market if/when it comes into effect as part of the much anticipated 6 March 2024 Spring Budget.
If implemented, this could potentially save families thousands of pounds in tax payments and reduce the burden that is often associated with inheritance.
Having said that, there are even talks to abolish the ever-so-unpopular tax altogether which some find it tad too brave.
Capital Gains Tax Cut
Another aspect to keep an eye on in the upcoming Spring Budget is the capital gains tax. This tax is currently at 20% for basic rate taxpayers and 40% for higher rate taxpayers.
There have been speculations that this may be reduced to 18%, making it more aligned with other countries such as Australia and Canada. In addition, there could also be a substantial tax-free allowance increase from £12,000 to as high as £15,000.
With these potential changes in place, individuals could potentially save significant amounts of money when selling assets such as property or investments. This could also have a positive impact on the economy by encouraging more investment and entrepreneurship.
Interest Rates Cut
With the inflation rate on its way, that being currently 3.9%, interest rates cut are much anticipated in 2024. Many are hoping that the Bank of England will cut interest rates by at least 0.25% to help ease the financial burden on households. This would be a welcome relief for many, especially in these uncertain economic times.
Tax Threshold Freezes
One area that may not see any changes in the upcoming Spring Budget is tax threshold freezes. These are set to remain at the current levels for basic rate taxpayers and for higher rate taxpayers.
This could potentially mean that individuals will not see any decreases in their income tax rates. However, with other potential tax cuts being implemented, individuals may still see some relief in their overall tax burden.
Conclusion
Overall, the 2024 Spring Budget is highly anticipated for its potential tax cuts and adjustments that could provide much-needed relief for individuals and families across the UK. With changes expected in income tax, inheritance tax, capital gains tax, and interest rates, there is a lot to look forward to and potentially benefit from. It is important to stay updated on any announcements made during the budget, as these changes could have a significant impact on personal finances. So, let's keep an eye out for what Jeremy Hunt has in store for us this March!
