Could lacklustre Spring Budget drive people out of UK?
Dissecting the Spring Budget
Chancellor Jeremy Hunt’s Spring Budget is a flop. A flop that I believe will help to drive people and investors out of Britain.
Wednesday’s Budget is the Chancellor’s fourth fiscal event, just over three months after last year’s autumn statement.
As I was quoted by London Loves Business, The Banker, Private Banker International, Trust Net, Elite Business Magazine, and Birmingham Mail, amongst other media, ahead of the Budget we knew Hunt would unveil another cut to National Insurance (NI) and extend a freeze on fuel and alcohol duty, within efforts to ease the burden on people’s finances.
The current NI rate of 10% will fall to 8%, whilst contributions for the self-employed will reduce from 8% to 6%.
Fiscal Maneuvers and Frozen Allowances
Whereas alcohol duty has been frozen until February 2025, whilst the 5p cut to fuel duty will be extended for another year.
These moves were announced in advance. Most likely to make the most of the good news as possible with voters heading to the polls later in the year.
However, the personal allowance and thresholds for the higher and additional rates have been frozen again. Consequently, as wages rise more people will move into higher-rate tax bands.
As it stands, the tax burden will now hit 70-year highs.
We can see the Chancellor is attempting to entice potential voters by indicating more tax cuts in the next Parliament. Yet only if the Conservatives win the election this year.
Tax Reforms and Potential Exodus
Therefore, with the mounting tax burdens and the economy in a deeper-than-forecast technical recession. This resulting in reduced investment for businesses and jobs. We fully anticipate an increasing number of hard-working people throughout the UK will be seeking work and life opportunities overseas.
With them being squeezed harder in the UK, it can be assumed they’ll seek destinations offering a lower cost of living. Not to mention lower tax liabilities, a growing economy and more career opportunities.
Tax Overhaul and Potential Exodus
Furthermore, the non-domiciled tax status is to be scrapped by the Chancellor “to fund tax cuts.”
The non-dom status allows wealthy, often foreign, residents to avoid tax on overseas income.
From April 2025, for the first four years of UK residency, foreign income and tax will not be taxed in Britain. However, this as long as the individual has been non-tax resident for the prior 10 years. After four years, foreign income and gains will be taxed in the UK. This in the hands of a UK resident non-dom, irrespective of whether it is remitted or not.
Additionally, non-doms already in the UK on the current system will have two years to bring previously untaxed income and gains to the UK with tax at a flat rate of 12%.
Moreover, an intention to move to a residence-based regime for inheritance tax was announced. There is a proposal for a 10-year exemption period for non-dom new arrivals. There is also a 10-year ‘tail-provision’ for those who leave the UK and become non-resident.
To my mind, scrapping the non-dom tax status will likely be a driving force for people to leave the UK, resulting in the loss of significant direct and indirect investment as those impacted are expected to relocate to more appealing jurisdictions.
I believe that the Spring Budget was lacklustre and one that could result in being a masterclass in the Law of Unintended Consequences that will drive more hard-working people and investors out of Britain.
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