The Impact of the 2024 Budget on Tax, Business and Inheritance Planning
The recent budget changes have introduced a new direction for the country’s economic and fiscal policies. These shifts emphasise a mix of increased public spending, higher taxes, and strategic investments aimed at boosting economic growth and supporting essential public services. However, the implications for businesses, taxpayers, and the broader economy are complex, requiring careful analysis.
1. Tax Policies and Revenue Generation
Recent fiscal adjustments have significantly altered the tax landscape. The changes are designed to generate substantial revenue to fund public services while targeting specific sectors and income brackets. Key tax measures include:
- Impact on Businesses: Higher National Insurance contributions and increased taxes on capital gains may deter investment and hiring, particularly among small and medium-sized enterprises (SMEs).
- Educational Equality: Extending VAT to private school fees has sparked debates on its implications for educational equality, as families who previously chose private education may face higher costs.
- Inheritance Tax Changes: Perhaps even more impactful for most families than capital gains tax adjustments is the inclusion of pension funds in inheritance tax calculations. This change could significantly affect how families plan for generational wealth transfer.
These tax increases are part of a broader strategy to increase the government’s fiscal capacity to fund social services without directly burdening low taxpayers.
2. Public Spending and Investment Initiatives
The budget outlines a significant increase in public spending aimed at addressing long-standing issues in healthcare, education, and infrastructure. Major spending areas include:
- Healthcare Investments: Increased funding to support the National Health Service (NHS) and ensure better healthcare outcomes. The rationale is that a healthier population contributes to a more productive workforce.
- Council Housing Development: Significant investments in housing are expected to alleviate the housing crisis, increase affordable housing availability, and stimulate construction-related job growth.
- Education and Skills Training: Funding allocated to education and vocational training programs aims to enhance workforce skills, aligning with long-term economic growth objectives.
These initiatives are designed to boost public welfare and stimulate the economy by improving essential public services and creating jobs.
3. Economic Growth Projections
Despite the government’s focus on growth, projections indicate a mixed outlook. The short-term growth forecast shows a temporary uptick, but long-term predictions remain modest:
- Projected Growth Rates: The economy is expected to experience a brief period of growth, reaching around 2% next year, followed by a steady decline to an average of 1.66% over the next five years.
- Influence of External Factors: Global economic uncertainties, including trade policies and geopolitical tensions, could further influence these growth rates, making the economic landscape unpredictable.
The focus on public investment is expected to drive productivity improvements, but concerns remain about whether these investments will be enough to counteract slow, underlying growth.
4. Balancing Taxation and Public Sentiment
The budget introduces a series of tax increases that target businesses and high-income individuals, aiming to fund public services without significantly affecting lower-income earners. However, there are concerns about:
- Impact on Businesses: Higher National Insurance contributions and increased taxes on capital gains may deter investment and hiring, particularly among small and medium-sized enterprises (SMEs).
- Public Response: While many citizens support increased funding for the NHS and public services, there is apprehension about how higher taxes might affect economic opportunities and disposable income.
The government faces the challenge of balancing its commitment to social welfare with the need to foster a business-friendly environment.
5. Long-Term Fiscal Strategy
The fiscal plan sets out a strategy for the next decade, focusing on achieving sustainable growth through increased investment and progressive taxation. Key elements include:
- Debt Management: The budget allows for increased borrowing to fund public investments, with the goal of stimulating growth while maintaining fiscal responsibility.
- Social Welfare and Inclusivity: By prioritising investments in housing, healthcare, and education, the strategy aims to create a more inclusive economy, with benefits distributed more equitably across different socio-economic groups.
- Green Initiatives: Although the budget supports green growth, certain measures, like the continued freeze on fuel duties, indicate a cautious approach to balancing environmental goals with political and economic considerations.
Conclusion
The new fiscal measures represent a strategic shift towards increased public spending and targeted taxation. While the focus remains on fostering growth and enhancing public services, the success of these policies will heavily depend on effective implementation and the government’s ability to navigate ongoing economic challenges.
The coming years will be crucial in determining whether these strategies can truly deliver on their promises of economic renewal and social equity.
Given the increased burden on business owners due to the rising costs associated with improved workers’ rights and higher taxation, this budget is undeniably a considerable gamble.
If you are concerned about the future of your business or are worried about inheritance tax, do contact Wills, Tax and Trusts Ltd. to see how we can help you navigate the complexities in the years ahead.
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Ray Best
Like his academic development, writing came late to Ray. He has written several published works, “Inheritance Tax Planning – My Way” and “Shareholder Protection & Partnership Protection” and has had four feature articles published in Tax Adviser magazine, but the publication he is most noted for is the joint collaboration with Tony Granger “Inheritance Tax Simplified”.
