What should be in this year's Spring Budget?

With a General Election on the horizon, all eyes are focussed on what the forthcoming Spring Budget will contain.

Tony Larkins, Managing Director of Beacon Wealth Management, reveals what he believes the Budget should consider at the Spring Budget announcement in March 2024.

The Spring Budget is always a guessing game on what it will contain, and who the winners and losers will be. With the economic climate as it is – the UK dipping into a technical recession at the end of 2023 (Office for National Statistics) – there are some key areas the Government should consider, to boost economic activity and support people’s personal finances.

A Stamp Duty holiday, to increase house sales and boost spending

Having another stamp duty holiday for 12 months would help stimulate housing sales and encourage people to add to the economy by spending money on decoration and renovation.

The UK housing market has slowed significantly – November 2023 saw a 22% fall in completed housing transactions compared to the previous year (ONS).

The UK is a nation of people who love their homes, and love home ownership. Making it easier for people to move would increase spending on decorations, renovations, extensions, and the VAT receipts from this spending would contribute positively to the economy.

Boost business spending and productivity with more tax allowances

Increasing tax allowances for business capital expenditure will encourage companies to spend more and improve productivity.

The full-expensing policy for businesses announced in April 2023 is only due to last until 2026. Ending it then would have little or no long-run effect on the economy (Institute for Fiscal Studies). The Government should follow through on its desire to make this policy permanent.

The current policy also biases towards purchases of plant and machinery, at the expense of other assets – extending this policy to other types of investment would be welcome.

The CBI has also called for extending business capital allowances to hired or leased assets, not just owned ones. This would give more money back to small businesses, many of whom find it more effective to rent assets than to buy them outright.

Increase R&D spending to promote innovative, sustainable growth

The 2023 Spring budget announced £3.5billion in funding towards making the UK a science and technology superpower (GOV.UK), as part of its wider aim to invest £20bn in R&D in 2024/25 (GOV.UK). The Government also lowered the threshold for how businesses qualified as R&D intensive from 40% to 30% of total expenditure. This ensured another 5,000 SMEs qualified for R&D tax relief.

Continuing this trend in funding would help businesses innovate, grow sustainably and contribute to growth in the UK economy.

Support an ageing workforce with business National Insurance relief

People who work past state retirement age no longer have to pay Class 1 or Class 2 National Insurance (NICs), but employers, however, still have to pay their contributions.

Removing this requirement for employers would bring parity between employee and employer, encourage businesses to take on older workers and, subsequently, this would increase the number of people working past state retirement age and contributing to the economy.

Inheritance Tax: Remove or Reform

Inheritance Tax has always been seen as unpopular – a move on this would be no doubt resonate with voters ahead of a General Election.

Inheritance Tax should either be abolished, or at least changed so that the main residence is not subject to the tax, regardless of value, and remove assets inherited. With house prices increasing the way they are, Inheritance Tax could be payable on a 1-bedroom flat in London, but not a 4-bedroom house somewhere else in the UK! And why should inherited assets cause you to pay tax when the assets have already been taken into account for the deceased.

The Government has said that any movement on Inheritance Tax is just speculation. But abolition or reform by removing a primary residence from the tax calculation could be a popular policy for our nation of homeowners.

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