The Budget has underlined a government with few options for delivering its supposed long path to lower tax, with minimalistic tax cuts that focused on individuals rather than businesses.
The economic context has precluded Chancellor Jeremy Hunt from little other than minimalistic cuts to individual tax rates rather than tackling the costs of doing business. Even in these cuts to individual taxes, Hunt has introduced a 2% cut to the national insurance rate, which will cost the Exchequer £10 billion rather than the £13.7 billion the rumoured cut to income tax would have cost.
The 2% reduction in the national insurance rate comes on the back of the initial 2% cut introduced by Hunt in the last Autumn Statement. Once this second cut is implemented, it will allow a maximum saving of £754 a year for employees, meaning that a salary of £35,000 would see workers save £448 a year.
These savings mirror those of the initial 2% cut in the Autumn Statement, meaning that the average worker will now have an extra £896 in their pocket per year when compared with this time last year.
While measures such as this are undoubtedly welcome – as is the 2% decrease in the national insurance for self-employed business owners – there remain inequalities in our tax system, such as the earnings threshold of the child benefit system.
While the increasing of both the threshold and the taper applying to the payment is better than nothing, it remains the case that a family with one earner above £60,000 and one on £30,000 would be subject to stricter measures than a family with two earners on £59,000.
Hunt announced a consultation with an eye to reforming this threshold to apply to collective household income by 2026, but it is disappointing that this was not introduced this year.
Locally, the untargeted nature of the Barnett consequentials means that the £100 million given to Northern Ireland will have little effect.
Without direction, the likelihood is that this money will be used to service black holes of debt rather than being targeted towards business sectors in need. But local businesses will be buoyed by the increasing of the VAT threshold from £85,000 to £90,000, although after a seven-year freeze, this increase does feel small.
With the general election looming, Hunt was given an opportunity to deliver swinging tax cuts that would have brought us further down the long path to lower tax he proclaimed his government to be on in his 2023 Autumn Statement.
But instead has delivered a bland and beige budget with an eye on damage limitation.
- Neil Armstrong is tax director at Baker Tilly Mooney Moore.
