Explainer: Key points from the Budget as vape duty introduced and NI is cut
THE Chancellor has unveiled the Government’s future spending plans in the Spring Budget. Jeremy Hunt announced a raft of measures including promises to cut National Insurance and reform the child benefit regime.
Here’s all you need to know…
National Insurance cut
This is the headline policy from the Budget – and the one with the most widespread effect. The Chancellor says he ultimately wants to end the “unfair” system of workers paying two taxes on their income while people who derive their income from other sources pay only income tax.
He will cut National Insurance by two pence in the pound to 8% for employees. It will fall from 8% to 6% of income for the self-employed.
Hunt said: “It means an additional £450 a year for the average employee or £350 for someone self-employed. When combined with the autumn reductions, it means 27 million employees will get an average tax cut of £900 a year and two million selfemployed a tax cut averaging £650.”
National Insurance is a UK-wide tax so the impact will be felt by workers in Scotland, England, Wales and Northern Ireland. The Scottish Government has the discretion to set slightly different rates of income tax than the UK.
Windfall tax
THIS is the big political story of the Budget – the Scottish Tory revolt over the Chancellor’s plans to extend the oil and gas windfall tax. The Tories put a windfall tax on the profits of energy giants after the Ukraine war sent prices soaring.
Acknowledging the ongoing impact of the war, the Chancellor said he would extend the tax until 2029, with the aim of raising £1.5 billion.
It has sparked fury among Tory MPs north of the Border, with energy minister Andrew Bowie and Scottish Tory leader Douglas Ross in open revolt over the policy.
Non-dom status ‘abolished’
THE Chancellor has said he will abolish non-dom status – the controversial tax loophole which allows the very wealthy to pay tax abroad.
It was until recently employed by the Prime Minister’s wife Akshata Murty, who used it to avoid paying UK taxes. Rishi Sunak was “recused” from discussions on this decision, Downing Street said.
As it stands, people with a connection to another country are allowed to claim they are not fully settled in Britain, meaning they can claim money earned abroad is not taxed in the UK.
The Chancellor said he would “abolish” the current system and replace it with a new one.
The details remain hazy on how this will be accomplished but Hunt said people who currently benefit from the regime will be given “transitional arrangements”, which he said would include a two-year period in which non-doms will be “encouraged” to bring wealth earned overseas to the UK.
A new regime will be put in place for new arrivals who will continue to be able to claim non-dom status to avoid UK taxes on foreign income and gains for their first four years of UK residency.
This would be “one of the most attractive offers in Europe”, according to the Chancellor. But after the four-year period, they would need to pay UK tax.
Child benefits
THE Chancellor has said he wants to end the “unfairness” of the current child benefits system, which sees the full payment denied to households where one parent earns over £50,000.
In the short term, this figure will be increased to £60,000 and the Government will consult on moving to a household system, Hunt added.
He said: “I confirm that from this April the high-income child benefit charge threshold will be raised from £50,000 to £60,000. We will raise the top of the taper at which it is withdrawn to £80,000.
“That means no one earning under £60,000 will pay the charge, taking 170,000 families out of paying it altogether.”
Spending cuts
HUNT has been accused of presiding over a cuts Budget that will see spending slashed in all but a handful of key areas.
The Chancellor committed to have day-to-day public spending rise by 1% per year. But most of this will be “eaten up” by standing commitments to increase funding for the NHS, defence, schools, overseas aid and childcare, according to the Institute for Fiscal Studies think tank.
It said that this will necessarily mean other areas of public spending will need to come down to meet the 1% target.
Scottish Finance Secretary Shona Robison said the Chancellor had “sacrificed” public services in order to fund tax cuts.
Cigarettes and alcohol (and everything else)
FUEL duty will remain frozen – a 5p cut has been maintained since 2011 – for at least the next 12 months, the Chancellor announced.
An excise duty will be introduced on vapes from October 2026 in a bid to stop non-smokers taking up the habit.
Tobacco duties will be increased again while alcohol duties will remain frozen.
Along with the freeze on fuel duty, the booze levy freeze will nudge down “headline inflation” by 0.2%, according to the Chancellor.