The UK’s Budget 2024 introduces a significant £40bn tax hike, sparking widespread discussion on its economic implications.
- A 1.2 percentage point rise in National Insurance Contributions is expected to put pressure on companies.
- Capital Gains Tax increases raise concerns for tech sectors reliant on investment.
- Small businesses face challenges but find some relief through allowances.
- Mixed feelings arise over extended inheritance tax thresholds, aiming to stabilise public finances.
The UK’s Budget for 2024 has brought about substantial discourse with its unprecedented £40bn tax increase. Central to this budget is a 1.2 percentage point hike in National Insurance Contributions (NICs) for employers, which will increase the rate to 15% starting April, projected to generate £25bn. Business leaders are apprehensive, foreseeing this as an additional financial burden that could complicate employment conditions and wage increases. Rain Newton-Smith, Chief Executive of CBI, articulated the concerns of many, stating, ‘This is a tough Budget for business,’ highlighting potential setbacks for hiring and wage growth.
In addition to the NICs adjustment, the Budget raises the lower rate of Capital Gains Tax (CGT) from 10% to 18% and the higher rate from 20% to 24%, leaving rates on residential property unchanged. Muj Choudhury, CEO of RocketPhone, expressed apprehension about this change, particularly its negative impact on the technology and AI sectors that rely on risky capital for early growth. He commented, ‘This reform sends the wrong message as we try to establish the UK as a global AI hub.’
For smaller businesses, the increased NICs could pose significant barriers. Todd Davison of Purbeck Personal Guarantee Insurance warned that these hikes might severely impact small enterprises still reeling from the pandemic, potentially escalating operating costs and deterring new hires. However, there are alleviating measures such as the Employment Allowance increase, which aims to ease the burden of small company payrolls. Michelle Ovens CBE, founder of Small Business Britain, noted that there is a positive outlook due to business rate reliefs, benefiting many small and high street businesses despite looming challenges.
The extension of the inheritance tax threshold freeze until 2030 has garnered mixed reactions. While the government’s stance is that the moves are essential to address fiscal gaps and support necessary compensations for systemic issues, such as the Post Office Horizon scandal, some view it as a potential hindrance to economic vitality. Ms Reeves has defended these fiscal measures as necessary to bolster public sectors including healthcare.
Overall, the £40bn tax increase underscores the government’s intent on addressing budgetary needs, yet it raises fears about potentially undermining the UK’s competitive position. The focus remains on whether these adjustments will attract or discourage crucial private sector investments.
The Budget 2024 presents a challenging yet potentially transformative moment for the UK’s economic trajectory, hinging on execution and sector response.
