There has been a lot of speculation about what such an early Budget will mean. Some have suggested that it will pave the way for an election in May. Other commentators have predicted that the Chancellor will use it to push through popular measures, such as abolishing Inheritance Tax.
Of course, trying to predict what will be in the 2024 budget involves a certain amount of crystal ball gazing. That said, leaks and off-the-record briefings often result in some of these predictions being right. In this post, we look at what commentators are suggesting will be in the Budget and how these predictions might affect you.
2024 Budget and tax
The Daily Telegraph suggests that the government is considering axing Inheritance Tax (IHT). The newspaper has been campaigning for this for some time now. It claims that Inheritance Tax was nearly abolished as part of the Autumn Statement. However, it points out that the government decided to focus on tax changes ‘more directly focused on boosting economic growth’.
Inheritance Tax is widely seen as an unfair levy, so axing it is likely to be a popular move. That said, relatively few people pay IHT, although this number is rising. In 2020 to 2021, some 27,000 estates paid Inheritance Tax. This was an increase of 4,000 (17%) on the previous year.
The Telegraph also suggests the Chancellor is considering increasing the threshold at which people pay the higher 40% rate of Income Tax. This is currently £37,701. If this happens, it will affect many more people. High inflation and related wage increases have pushed many more people into the higher tax band. HMRC currently predicts 18% of taxpayers will pay the higher rate in this financial year. In 2020/21 the figure was only 13.9%.
An early election?
The Financial Times has suggested that an early 2024 Budget could signal an early general election. This could take place at the same time as the local elections on 2nd May.
However, this now seems unlikely. Since then the Prime Minister has said his working assumption is that the election will be in the latter half of the year. Indeed, the FT quotes a Downing Street insider saying a later election will ‘give more time for lower inflation, tax cuts and — hopefully — lower interest rates to feed through’.
IR35 reforms to be scrapped in the 2024 Budget?
Back in the September 2022 Budget, then Chancellor Kwasi Kwarteng announced that he would scrap IR35 reforms. The next month, new Chancellor Jeremy Hunt reversed the decision. This means that the responsibility for deciding a worker’s IR35 status lies with the hiring organisation. Critics have said this has led to many contractors wrongly being defined as employees for tax purposes.
Contractor Weekly has suggested that Mr Hunt could use the 2024 Budget to again scrap the IR35 reforms. It points out a number of Conservative MPs are lobbying for this to happen. These include Jonathan Gullis, Sir John Redwood, Liz Truss, David Davis and Robert Buckland. However, there currently seems no appetite for change within government, so changes to IR35 may be more wishful thinking than likely.
Could the 2024 Budget change the government’s fortunes?
The government is almost certain to use the 2024 Budget to help boost its popularity ahead of the election. However, time is running short and Labour has enjoyed a double digit poll lead for some time. The current tax burden is the largest it has been since World War II. Abolishing IHT will affect relatively few families. While raising the higher rate threshold for Income Tax would help many more people, the government has currently frozen personal tax thresholds until April 2028. If the tax-free threshold in particular remains frozen, fiscal drag will mean people pay more tax.
The Prime Minister will be hoping that eye-catching tax changes will translate into votes. But will they be sufficient to convince people to vote Conservative? And will they really result in much more money in our pockets? If only that crystal ball were a bit clearer!
About Ben Locker
Ben Locker is a copywriter who specialises in business-to-business marketing, writing about everything from software and accountancy to construction and power tools. He co-founded the Professional Copywriters’ Network, the UK’s association for commercial writers, and is named in Direct Marketing Association research as ‘one of the copywriters who copywriters rate’.