Spring Budget patches up potholes but stealth tax sinkhole remains

07 March 2024

Chris Etherington, private client tax partner at leading audit, tax and consulting firm RSM UK, said: ‘This was a Budget of patching up potholes in the tax system for working families but the road needs relaying. A sinkhole of stealth taxes still lies ahead and many will still see any short-term tax savings are far outweighed by the freezing of allowances and thresholds.

‘The Chancellor has claimed that average personal taxes will fall to their lowest level since 1975 but the average earner is still worse off. Anyone with earnings of £33,750 will still pay more in tax from 6 April 2024 than they would have done if the income tax personal allowance had increased with inflation to £15,220 and the corresponding National Insurance contributions thresholds set at the same level. 

‘There are still fundamental flaws in the tax system which the Chancellor has kicked into the long grass for now. An area that the Chancellor has acknowledged requires a more substantial pruning is the high income child benefit charge (HICBC) regime. 

‘Many families will welcome the news that the HICBC rules are set for a more fundamental reform in due course. Too many people have been penalised and taken through the courts over trivial amounts of tax on this issue. A recent freedom of information request submitted by RSM UK has revealed that 1852 hours were recorded by litigation staff from April 2023 to January 2024. Records of the time spent by litigation staff were not even kept before this date so the reality is that the time and cost could be much higher policing this issue. 

‘The Chancellor has struggled to balance the books on this Budget but we may well see a further fiscal event later this year if the economic picture improves. The Chancellor will be banking on some bumper tax revenues from capital gains tax in particular in the coming year. 

‘By pulling the rug on furnished holiday let investors from April 2025, the Chancellor will be hoping many will sell up to bank the current 10% CGT rate they could benefit from. This could set a light under the property market as a result before next year’s deadline and in turn, boost stamp duty land tax revenues as well.

‘The Chancellor will be hoping that voters benefit from an immediate sugar rush from these tax cuts but many will find these are short-lived and wake up to the hangover of fiscal drag.’