MoneyWeek article- Spring Budget 2024

Given that this is an election budget we are expecting several announcements that will attempt to return the 'feel good factor' to UK households. These could include stamp duty reductions to reignite the housing market as well as reductions to income tax and inheritance tax thresholds. However, my concern is that it may be too little too late.

Ideally, what we really need, is a drive to build more homes. However, these need to be homes people want in places that people need them, rather than simply the most profitable types for the builder in the most affluent areas. It would be great to see some incentives to help smaller developers and builders drive that increase in homes, as opposed to our reliance on a handful of huge national builders to deliver all that the country needs. It would also be great to see some joined-up thinking around planning laws that allow for these new homes to be built swiftly and not caught up in months or years of disputes with existing residents - there is plenty of potential in smaller projects that could help local communities, such as developing the long-abandoned factory on the edge of town or the run-down manor house in the centre of the village, it doesn't always have to be massive developments on virgin land.

I'll be outspoken, leave IHT alone! Removal of a tax that only impacts the wealthier in society would, yet again, send the wrong message about tax priorities. The tax hole left would need to be filled from somewhere else, and currently, that is coming from hard-working families who are seeing more and more of their income falling into the 40% band.
Instead, the budget should look to stimulate growth, with cuts to corporation tax for SME's. Lower corporation tax has been repeatedly shown to promote growth, and hence ultimately increase tax yield. It is also a tried and tested conservative policy at a time when both red and blue parties are drawing on this historic playbook.
We are also often told about the benefits of Brexit, well one of these was to be able to control VAT rates. A reduction in VAT would assist a broad range of businesses across the UK, encouraging growth. With taxation at historic highs, it would also do a lot to help ordinary households.

The Spring Budget will be heavily skewed towards tax cuts, driven by the approaching elections and a desire to boost the Conservative Party's approval ratings. The 2023 Autumn Statement already announced some cuts, which suggest further significant measures might be reserved for the pre-election Budget. We estimate that the income tax will hover around a 1p or 2p reduction in the basic rate, potentially 16-18%. On the other hand, we project inheritance tax to decrease as well between 30% to 40% for large estates although scrapping it might be too early for now despite the constant urging from Tories. What’s certain is that with polls favouring the opposition Labour Party, the Conservatives will be using tax cuts as a tool to win back voters. Focusing on lower and middle-income earners might prove more electorally beneficial, however. As such, the economic performance between now and the Budget will influence the available fiscal space and the public's receptiveness to these measures.

An election year budget will always contain 'sweeteners' to appeal to voters and the Spring Budget will be no different. We need confidence and stability but more than that, the public need to see more money in their pockets before we'll see any real growth. Taxation affecting landlords who hold properties in their own names needs to be revisited if we're to reduce the exodus of investors who are finding it no longer financially viable to stay in the industry. The availability of affordable housing isn't just about buyers but renters too and for that we need a healthy and diverse rental market. Offering incentives for both larger and smaller-scale developers in social housing would do much to address shortages.