UK government abolishes centuries-old tax breaks for the rich in preelection budget announcements

Elliot Smith

This is CNBC's live coverage of U.K. Finance Minister Jeremy Hunt's Spring Budget statement.

LONDON - March 6: The Chancellor Of The Exchequer Jeremy Hunt poses with members of the Treasury staff as he leaves 11 Downing Street to deliver the Budget on March 6, 2024 in London.

LONDON — U.K. Finance Minister Jeremy Hunt announced his Spring Budget, possibly the final fiscal event before what promises to be a challenging General Election for the ruling Conservative Party.

Hunt announced that the government will abolish the non-domiciled tax status, implementing a long-standing policy priority for the main opposition Labour Party. Non-dom status enables someone who lives in the U.K. but is not settled in the country permanently to only pay U.K. tax on money made in the country, and to avoid paying it on foreign income.

Prime Minister Rishi Sunak's wife previously claimed non-dom status on income from dividend payments on shares of Indian IT giant Infosys, the firm founded by her billionaire father.

Hunt also confirmed that National Insurance, a tax on payrolled workers, will be cut by 2 pence from 10% to 8%, furthering the previous cut in November from 12% to 10%.

The chancellor is navigating the constraints of fragile public finances and a stagnant economy that entered a shallow technical recession at the end of 2023.

Inflation has fallen faster than anticipated and market expectations for interest rates are well below where they were prior to Hunt's Autumn Statement in November, but many British households are still feeling the cost of living squeeze, while public services remain extremely stretched.

Watch the livestream below:

Wed, Mar 6 2024 10:20 AM EST

Former UK finance minister responds to plan to abolish non-domiciled tax status

Former British finance minister Philip Hammond said it would be a mistake not to have a system in place that encourages so-called "non-doms" to reside in the U.K.

Non-domiciled tax status allows people who are based, but not settled, in the country to only pay U.K. tax on money made in the country. As part of the Spring Budget statement, U.K. Finance Minister Jeremy Hunt said on Wednesday that this would be scrapped and replaced with a new system.

"It would be a massive own goal to remove non-dom taxation and then see a big outflow of investment from the U.K.," Hammond told CNBC's Silvia Amaro on Wednesday.

"It would be a mistake to have no regime in place that encouraged people in those circumstances to base themselves in the U.K.," he said. "If we said for example to people that they have to pay tax on their worldwide assets if they come and spend time in the U.K. I think that would probably be detrimental to the U.K. economy in the long term."

Hammond said the integrity of the policy would now depend on the details of Hunt's new plan.

Hammond was broadly positive about the statement, saying it was "a careful and thoughtful budget from a careful and thoughtful Chancellor."

He also said that he would like to see lower taxes eventually, but that public services needed to be taken into account. "In the future we need higher productivity, higher economic growth, so we can reconcile this tension between the desire for good public services and the desire to keep taxes at a bearable level."

— Sophie Kiderlin

Wed, Mar 6 2024 9:21 AM EST

Resolution Foundation: Taxes still rising to highest level since 1948

Torsten Bell, chief executive of the Resolution Foundation think tank, highlights that despite Wednesday's cuts to National Insurance, personal taxes are still on the rise.

Wed, Mar 6 2024 9:12 AM EST

Starmer says Labour supports NI cut, but notes absence of income tax cut

British leader of the Labour Party and opposition Keir Starmer speaks during a news conference, in London, Britain, July 8, 2022.

Starmer says Labour supports the government's cut to National Insurance payments, but highlights that when Prime Minister Rishi Sunak was finance minister in 2022, he promised that the basic rate of income tax would be cut from 20 to 19 pence in 2024.

"Having briefed that all week, that an income tax cut was coming, that promise is in tatters today," Starmer says.

Wed, Mar 6 2024 9:12 AM EST

Labour's Starmer: Budget is the 'last, desperate act of a party that has failed'

Labour leader Keir Starmer begins his response to the budget, which he calls "the last, desperate act of a party that has failed."

He lambasts Hunt for trying to paint a rosy picture of an economy in recession.

"The story of this Parliament is devastatingly simple: a Conservative Party stubbornly clinging to the failed ideas of the past, completely unable to generate the growth working people need, and forced by that failure to ask them to pay more and more for less and less," he says.

He hammers the government over rising prices for food, rents and mortgages, and characterizes the new tax cuts as "giving with one hand, taking even more with the other."

Wed, Mar 6 2024 9:12 AM EST

OBR: 'The medium-term economic outlook remains challenging'

The Office for Budget Responsibility's economic and fiscal outlook document was uploaded as Hunt retook his seat.

The independent forecaster noted that inflation has receded more quickly than it expected in November, while markets now expect a sharper decline in interest rates.

"This strengthens near-term growth prospects and should enable a faster recovery in living standards from last financial year's record decline. But the medium-term economic outlook remains challenging," the OBR said.

"One of the biggest changes to our economy forecast is an increase in the size and growth of the U.K. population. But higher and rising levels of inactivity offset its impact on the overall size of the workforce, leaving our forecast for the level of GDP in five years virtually unchanged from the autumn, and the level of GDP per person slightly lower."

Wed, Mar 6 2024 8:45 AM EST

Sterling inches up slightly against the dollar

In this photo illustration, £20 notes featuring the late Queen Elizabeth II are pictured with a one Dollar bill notes on December 02, 2023 in Bath, England. 

The pound was slightly higher against the dollar at the close of the U.K.'s Spring Budget announcements.

Sterling was seen trading up 0.13% against the greenback at $1.2720 by 1:40 p.m. London time. It was down 0.13% against the euro at 1.16.

— Karen Gilchrist

Wed, Mar 6 2024 8:49 AM EST

High income child benefit threshold to rise to £60,000

The government will increase the threshold at which parents start paying the high income child benefit charge from £50,000 to £60,000.

Hunt claims this will make almost half a million families better off by an average of almost £1,300 per household.

Wed, Mar 6 2024 8:48 AM EST

Hunt confirms 2 pence cut in National Insurance cut from 10% to 8%

Hunt confirms that National Insurance, a tax on payrolled workers, will be cut by 2 pence from 10% to 8%, furthering the previous cut in November from 12% to 10%.

"It means an additional £450 for the average employee," he adds.

Self-employed NI will be cut from 8% to 6%.

The OBR estimates that when combined with the Autumn reduction, the NI cuts will mean the equivalent of 200,000 more people in work, adding 0.4% to GDP and 0.4% to GDP per capita, Hunt says.

"That means the average earner in the U.K. now has the lowest effective tax rate since 1975," Hunt claims.

"Their effective taxes are now lower than in America, France, Germany or any G7 country, because Conservatives believe that making work pay is of the most fundamental importance."

He vows to continue to cut National Insurance whenever the Treasury has the fiscal room to do so.

Wed, Mar 6 2024 8:41 AM EST

Hunt: Government will abolish 'non-dom' tax status

Hunt announces that the government will abolish the non-domiciled tax status, implementing a long-standing policy priority for the main opposition Labour Party.

Non-dom status enables someone who lives in the U.K. but is not settled in the country permanently to only pay U.K. tax on money made in the country, and to avoid paying it on foreign income.

The non-dom regime will be replaced with a "fairer, residency-based system" from April 2025, Hunt says, raising £2.7 billion in tax revenue by the end of the forecast period.

There will be a similar status open to people migrating to the U.K. for the first four years, however, after which they will have to pay tax in the country.

Hunt promises to use the additional tax revenue to "cut taxes on working families" rather than spend on public services.

Wed, Mar 6 2024 8:35 AM EST

Hunt extends energy windfall tax until 2029

"Because the increase in energy prices caused by the Ukraine war is expected to last longer, so too will the sector's windfall profits, so I will extend the sunset on the energy profits levy for an additional year to 2029, raising £1.9 billion," Hunt says.

Wed, Mar 6 2024 8:34 AM EST

Hunt announces new tax on vaping, one-off rise in tobacco duty, rise in air passenger tax

Hunt announces a new tax on vapes and says there will be a one-off increase to tobacco duties, along with an increase in tax on business class flights.

Wed, Mar 6 2024 8:26 AM EST

Hunt announces £3.4 billion investment in NHS productivity

An NHS support sign is shown through the crown logo on the gates to Ascot Racecourse on April 08, 2020 in Ascot, England.

Hunt says the government will invest £3.4 billion to modernize IT systems in the National Health Service, unlocking £35 billion of savings.

This means NHS spending has increased by 13% in real terms since the start of this Parliament in 2019, he says.

Wed, Mar 6 2024 8:24 AM EST

Take fall in government debt 'with a pinch of salt': IFS

Independent economic think tank the Institute for Fiscal Studies said forecasts outlining a fall in government borrowing should be taken "with a pinch of salt."

IFS director Paul Johnson said in a social media post that the forecasts "will depend on implementing extremely tight spending plans which will imply cuts for many public services."

During his Spring Budget, U.K. Finance Minister Jeremy Hunt said economic forecasts from the Office for Budget Responsibility showed government debt was set to fall over the coming years. He added that, by the end of the decade, borrowing for public services was set to hit its lowest level since 2001.

— Karen Gilchrist

Wed, Mar 6 2024 8:21 AM EST

Hunt says he will maintain plan for 1% increase in public spending

Hunt says he will maintain the government's plans to increase public spending by 1% in real terms, as set out in the Autumn Statement, but vows to "spend it better."

He announces a new public sector productivity plan that "restarts public service reform and changes the Treasury's traditional approach to public spending."

Wed, Mar 6 2024 8:17 AM EST

Hunt: Government will sell remaining stake in NatWest bank this summer

A sign outside a NatWest Group Plc bank branch in the City of London, UK, on Tuesday, July 25, 2023. Natwest is due to report first-half results on Friday, July 28. Photographer: Hollie Adams/Bloomberg via Getty Images

Jeremy Hunt says the government will privatize its remaining stake of around 31% in NatWest this summer at the earliest, with a sale to retail investors.

The government purchased the stake in 2008 in order to rescue the Royal Bank of Scotland during the Great Financial Crisis.

Wed, Mar 6 2024 8:16 AM EST

Hunt: AstraZeneca to invest £650 million in the UK

Hunt notes that AstraZeneca today announced a £650 million investment into the U.K., to expand its footprint on the Cambridge Biomedical campus and a manufacturing hub in Liverpool.

He says the government will also provide an additional £45 million for medical research, including into cancer, dementia and epilepsy.

The AstraZeneca logo.
Wed, Mar 6 2024 8:15 AM EST

Hunt will spend £200 million to extend the recovery loan program

Hunt promises £200 million to extend the recovery loan program and increase the VAT (sales tax levy) registration threshold from £85,000 to £90,000, bringing many small businesses out of paying VAT.

Wed, Mar 6 2024 8:08 AM EST

Hunt announces new 'British ISA' to drive UK stock investment

Hunt claims the U.K. is on track to become the next Silicon Valley, and the government will introduce a new "British ISA," allowing investments of up to £5,000 in British companies.

An ISA (individual savings account) is a popular savings account in the U.K. that offers tax-free interest payments.

The government has already announced plans to make pension funds disclose how much they are investing in the U.K. versus overseas markets.

Wed, Mar 6 2024 8:07 AM EST

Watch back: UK government borrowing to fall over coming years, OBR says

U.K. Finance Minister Jeremy Hunt said government borrowing is set to fall over the coming years as he outlined economic forecasts from the Office for Budget Responsibility (OBR).

Hunt also said that the government was expected to meet its target to reduce public sector borrowing to 3% of gross domestic product (GDP) three years ahead of schedule.

"There is nothing compassionate about running out of money," Hunt said.

— Karen Gilchrist

Wed, Mar 6 2024 7:59 AM EST

OBR forecasts 0.8% growth this year

The OBR expects GDP to grow at 0.8% this year and 1.9% next year, higher than previously expected.

After that, growth rises to 2.2%, 1.8% and 1.7% in 2028/9.

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