Despite the Institute for Fiscal Studies’ warnings against tax cuts without clear funding sources and the increasing economic pressure on the government, Chancellor Jeremy Hunt is expected to announce tax cuts in his upcoming Spring Budget.
Chancellor Hunt has not yet confirmed tax cuts, citing less ‘wiggle room’ to manoeuvre compared to the previous year. However, speculation suggests cuts to income tax, employee national insurance, inheritance tax, and an extension of fuel duty cuts may arrive. The NI may be reduced by 1 per cent, costing £4.5 billion per year.
Analysts estimate the government’s fiscal “headroom” to be between £15 billion and £20 billion, depending on potential spending cuts. Final decisions await economic forecasts due from the Office for Budget Responsibility.
However, since the fiscal headroom is shown to be lower than the expected official forecasts, Hunt faces tough choices on spending priorities and will most likely explore alternative funding sources for tax giveaways.
Hunt may introduce a “vaping products levy” on imports and manufacturers, potentially generating over £500 million annually from 2028 to 2029 to reduce smoking rates among young people, pave the way for Rishi Sunak’s goal of creating a “smoke-free generation,” and ultimately fund the potential tax cuts.
The IFS continues to warn of challenges in achieving tax cut measures given Britain’s ageing population and rising debt. Final decisions will be revealed by next week. Stay tuned to UK tax news here at Legend Financial. For your tax, accountancy, business development, and financial advisory needs, reach us today!
References
uk/politics/jeremy-hunt-budget-national-insurance-vape-tax-b2503069.html
uk/home-news/spring-budget-2024-income-ni-tax-cuts-hunt-b2503724.html
Budget 2024: Jeremy Hunt considers new vaping tax and NI cut. (27 February 2024). Retrieved from The Guardian: https://www.theguardian.com/uk-news/2024/feb/27/budget-2024-jeremy-hunt-vaping-tax-ni-cut-vapes-tax-cuts
