In the pre-election Budget, Jeremy Hunt unveils significant tax cuts, including a reduction in national insurance and an increase in child benefit thresholds, aiming to alleviate the financial burden on British citizens without increasing national borrowing.
On March 6, 2024, the UK Chancellor, Jeremy Hunt, announced in the pre-election Budget significant tax reductions, marking notable changes to personal taxes and benefits that affect millions of British citizens. In a move set to lower personal taxes to their lowest level since 1975, the Chancellor introduced a 2p cut in national insurance, promising an additional £450 a year for the average employed individual and £350 for those self-employed. This reduction, combined with a prior cut implemented in January, is poised to offer substantial savings despite concerns about the impacts of fiscal drag due to frozen income tax thresholds. The Office for Budget Responsibility has estimated the cost of this national insurance cut at £10.5 billion annually, mitigated to £8.9 billion when considering indirect effects. Despite potential concerns over more individuals being moved into higher tax brackets because of fiscal drag, Chancellor Hunt assured that these measures do not involve increased borrowing or compromise public services, highlighting further plans to abolish class 2 national insurance.
In addition to these tax cuts, the government has announced an increase in the child benefit threshold to £60,000, effective next month. This adjustment is anticipated to alleviate some financial pressures on families, offering a parent earning £60,000 with two children an annual sum of £2,212.60 from April. This policy change addresses the increasingly challenging childcare costs in the UK, providing crucial support amidst OECD’s high rates. However, the child benefit system revamp in 2013 has faced criticism for causing stress among high-earning parents and concerns about the full implementation of new measures by nurseries, leading to additional charges for parents. In response, the government has committed to securing funding rates for early years providers for the next two years, with plans to make the tax system more equitable and transparent by considering a transition to assessing household income by 2026.
These fiscal policies represent a significant effort by the current UK government to alleviate financial burdens on workers and families, aiming to simplify the tax system while ensuring the sustainability of public services without increasing national borrowing.
