11 March 2024 The Spring Budget

Full Disclosure:​

The Spring Budget​

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The Story:

Last week, the UK Chancellor presented the Spring Budget. This involves setting out the key tax and spending decisions by the government, together with an update on the state of the economy.

The major thing you need to know is that despite this being the last budget before the general election, it wasn’t that flashy. This is because Jeremy Hunt had little headroom to work with thanks to the rules on government borrowing.

What you need to know for your interviews:

Economy: First, the UK financial forecast was rosier than expected. The economy is expected to grow by 0.8% in 2024, 1.9% in 2025, and 2% in 2026. Inflation is expected to fall below 2% this year.

Tax Cuts: The headline news is a reduction in national insurance, which is a tax paid by employees and the self-employed. Thanks to an increase in the threshold to register for VAT from £85,000 to £95,000, some very small businesses will also have more breathing room before they have to start paying VAT.

Social Reform: Other important news includes reforms to child benefits for higher tax earners and a £3.4bn investment to overhaul the NHS IT systems.

Abolishing the 'non-dom' regime: The government is funding its cuts through taxes on vaping, continuing its tax on profits in the energy sector, and notably, changes to tax breaks for non-domiciled residents. This last one is interesting; individuals who live in the UK but have a permanent home outside the UK currently don’t have to pay taxes on foreign income for up to 15 years. Abolishing this regime risks making the UK a less attractive place for wealthy individuals.

Investing in UK Shares: Finally, the government also announced a new British-only Individual Savings Account, intended to boost the investment in UK shares through tax savings for investors. Pension funds will also need to disclose how much of their assets are allocated to UK shares (with a view to subsequently encourage further investment).

What does this mean for law firms?

This is the domain of law firm tax departments, where lawyers will be involved in sending their clients a relevant update on how the budget materially impacts them. This is a good example of non-billable work (i.e., work that doesn't involve charging a client), where law firms will hope to add value.

Tax teams also frequently publish their budget updates on the website of a law firm, as you can see with Macfarlanes, Weil, Mishcon, and Bird & Bird. This is a useful marketing exercise; it's an opportunity to provide value to prospective and current clients, while positioning a firm as an expert in relevant tax matters.