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Jeremy Hunt's Budget will slash personal taxes by £10 billion

In his budget on Wednesday, Chancellor Jeremy Hunt plans to cut personal taxes by £10 billion, eliminate the colonial-era "non-dom" regime, and incentivise UK company investors. The Chancellor is expected to reduce national insurance payments significantly.

Jeremy Hunt will detail the government's spending and taxing goals in his next budget, which will be released on Wednesday. The chancellor is expected to announce a reduction in national insurance payments for workers in the budget, which will likely be the last one before a general election. This decline would follow a 2p reduction announced in his previous fall statement.

 

During this time, the Office for Budget Responsibility (OBR) will provide updated economic forecasts and an assessment of the federal government's financial situation for the next five years, including beyond the 2029 election. Here is what to expect.

 

Reductions in individual tax rates

 

The thresholds for the higher and additional tax rates and the personal allowance will be frozen once again. As earnings increase, more individuals will be pushed into higher tax brackets. The Institute for Fiscal Studies think tank predicts that this trend will increase the total tax rate to above 37% of GDP by 2028, the highest level in modern history.

 

Hunt is expected to allocate £10 billion towards a tax reduction that would reduce the national insurance payment rate from 10% to 8% of wages by 2p. The rate was reduced by 2% points from 12% to 10% in the autumn statement. The decrease is scheduled to take effect in April of this year.

 

Fuel Tax

 

The fuel tax has remained unchanged for fifteen years, and the chancellor is widely expected to implement a freeze again. Furthermore, he is expected to extend the 5p decrease in petrol tax introduced in 2022, which is scheduled to end this month. The total cost of the measures is estimated to be £5 billion.

 

Tax Hikes

 

Because of stagnant economic development, more funds are needed to cover Hunt's budget allocations. Additional taxes must be raised in other sectors, and further reductions in public services must be made to finance the personal tax reductions. There is speculation of a potential decrease in tax benefits for UK non-domicile residents, which may lead to yearly savings of £2 billion.

 

A new £500 million vaping tax will be implemented, and increased taxes on second homes leased out for holidays may generate further revenue.

 

Hunt is considering extending the windfall tax on the profits of North Sea oil and gas companies, implemented in May 2022, because of high gas prices caused by Russia's supply constraints to Europe.

 

Reductions in public services

 

The chancellor is contemplating reducing a modest 1% rise in public expenditure above inflation to 0.75%. Significant funding shortages for the NHS and other Whitehall departments could result from unmet wage agreements for nurses and other public sector workers and continuous price increases affecting public services. It would provide annual revenue of £5 to £6 billion.

 

Hunt has announced a plan to enhance public sector efficiency, aiming to save £1.8 billion by 2029. According to his proposal, thousands of police officer hours would be reallocated from administrative responsibilities to fighting crime.

 

Councils must submit their improved productivity plans by July. They must also decrease the number of consultants they employ and the diversity training they provide.

 

Government finances

 

The nonpartisan Office for Budgetary Review (OBR) will publish its latest economic projections. This year, lower inflation and interest rates are expected compared to the fall statement in November. Lower interest rates will decrease Hunt's debt, while lower inflation will alleviate some of the pressure from increasing public service fees.

 

Owing to last year's economic downturn, the OBR is expected to decrease its November prediction for GDP growth this year to 0.7% and for 2025 to 1.4%. Forecasts are expected to broadly align with the Bank of England's 0.2% for this year and 0.6% in 2025. The chancellor regrets the decline in tax income from consumers and corporations.

 

Hunt is expected to have a slight advantage in November due to his £13 billion headroom unless there are more tax hikes or reductions in public sector expenditure.

 

During the last year of a five-year projection, the chancellor must adhere to self-imposed debt regulations by decreasing the debt-to-GDP ratio, as he has pledged.