National Insurance and income tax cuts could be on the Chancellor’s agenda next week as the Government prepares for the Spring Budget.
Jeremy Hunt is reportedly considering scrapping the “non-dom” tax loophole on March 6 to help fund tax cuts.
As part of the tax break, foreign nationals living in the UK are able to avoid paying money to HM Revenue and Customers (HMRC) on overseas earnings.
This is expected to raise £2billion for the Treasury and would be a blow to the Labour Party which has previously announced it would fund its spending plans in Government by axing the loophole.
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Jeremy Hunt is reportedly exploring changes to non-dom tax rules
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Conservatives MPs, including Mr Hunt, have defended the non-dom regime with Prime Minister Rishi Sunak’s wife Akshata Murty making headlines last year for being a beneficiary of the tax break.
Defenders of the loophole have asserted it makes the UK a more attractive place for highly skilled and wealthy people to live and work.
Some 70,000 foreign nationals living in the UK are estimated to currently benefit from the existing non-dom tax rules.
Last month, the Chancellor reportedly told Cabinet members tax cuts were “unlikely” to be introduced this year due to the state of the UK economy.
In January, the Government slashed the rate of National Insurance for employees from 12 per cent to 10 per cent which will reportedly save a worker on the average salary of £450, although tax burdens will increase due to fiscal drag.
While further tax cuts have been floated by Government ministers, experts have called on Mr Hunt to instead unfreeze tax allowances which are set to remain at their current level until 2028.
Analysts have issued warnings over the impact of fiscal drag, when allowances are frozen as wages rise, is resulting in taxpayers paying more as part of a “stealth tax”.
Some have suggested the recent cut to National Insurance has had “limited benefit” on everyday workers.
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Britons have seen the tax burden rise significantly in recent years
GETTYClive Pointon, the head of Wills, Trusts, and Tax at Aaron and Partners, outlined how Mr Hunt is in “even more pressure” to confirm tax cuts in next week’s Budget.
He said: “The Conservatives share a similar stance on income tax with Labour and have made several recent changes to capital gains tax.
“This leaves inheritance tax as the obvious issue to use to distance themselves from their political rivals.
“Whether a change that benefits those with capital in excess of £1million is a vote winner is another matter.”
