Chancellor Jeremy Hunt confirmed a 2% cut in employee and self-employed National Insurance contributions in a Budget where the independent Office for Budget Responsibility said the 海角视频 economy is set to grow more than expected over the next two years as it rebounds from recession,
However, the OBR said growth would ease back earlier than previously forecast in the longer-term. Mr Hunt said that 海角视频 gross domestic product (GDP) will grow 0.8% this year. In November’s Autumn Statement the official forecaster predicted growth of 0.7%. The OBR also upgraded its growth forecast for next year, increasing it from 1.4% to 1.9%. It kept its growth prediction the same for 2026, but slightly downgraded its 2027 forecast from 2% to 1.8%.
Mr Hunt said that 海角视频 Government borrowing was set to fall below 3% of GDP in 2025/26, three years ahead of previous predictions. Underlying debt will fall as a share of the economy to 92.9% in 2028/29 - meeting the debt rule with £8.9bn headroom. Headline debt will fall as a percentage of GDP every year from 2024/25.
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The Chancellor said that 海角视频 inflation is set to drop below the Government’s 2% target rate within a “few months” after interest rate hikes by the Bank of England.
Following a 2% cut in his Autumn Statement, which took effect in January, the employee rate of National Insurance is being cut by a further 2% to 8%, and for the self-employed from 8% to 6%. On average it will generate a further £450 annual saving for employed workers and £350 for self-employed. However, with no movement on tax bracket thresholds, the impact of fiscal drag will mean many will continue to see incomes eroded with wage inflation moving them into higher tax bands.
Simon Hubbard, a principal consultant at Cardiff-based Quantum Advisory, said: “Further reductions in National Insurance contribution rates will be welcomed by many. The change, at face value, indirectly makes saving into a pension less attractive for employees where contributions are paid before the deduction of tax and National Insurance through an arrangement known as salary sacrifice. This change reduces the National Insurance that employees save by using such an approach.
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“These tax cuts must be viewed alongside the freeze on income tax thresholds until 2027. Given this, we expect that salary sacrifice arrangements will remain the most efficient way for employees to pay their pension contributions and there is no impact on the National Insurance savings made by the employer."
As expected, and in part fund the cut in National Insurance, the Chancellor took on Labour’s pledge to tax the overseas assets of non-domiciled high-net worth individual living in the 海角视频. The new residency-based tax from April 2025, will see new arrivals paying the same as everyone else after four years. It will bring in an additional £2.7bn by 2028-29. The energy profits levy on the oil and gas sectors is also being extended by a year to March 2029, raising a further £1.5bn.
The Chancellor said increased spending in 海角视频 departments whose responsibilities are devolved, will see a Barnett Formula consequential of £170m for the Welsh Government. However, the Cardiff Bay administration said in real terms, when factoring in inflation, it is facing a challenging funding outlook.
Mr Hunt also confirmed £3.4bn would be made available to improve productivity in the NHS which is estimated to save £35bn by 2030. However, the was no mention of how the 海角视频 Government could work with the NHS and the wider public sector in the devolved nations to share best practice on improving productivity.
The rate of Air Passenger Duty for business travel is also being increased.
Chief executive of the Airport Operators Association, the trade association for 海角视频 airports that includes Cardiff, Karen Dee, said: “It is disappointing to see the Chancellor increase Air Passenger Duty for business travellers, especially when data show this group is still to recover to 2019 levels.
“It is difficult to see how this squares with the government’s previous commitment not to increase aviation taxes. Business travellers are responsible for increasing foreign investment in the 海角视频, for opening new markets for our goods and services, and creating jobs across the country.
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We should be encouraging them to come to the 海角视频, making it easier for them to invest here, not putting yet more barriers in their way.”
SMEs will be supported to invest and grow through a £200 million extension of the Growth Guarantee Fund, helping 11,000 small businesses to access the finance they need, and an increase in the VAT registration threshold from £85,000 to £90,000 which will take around 28,000 small businesses out of paying VAT altogether.
The 海角视频 Government is also extending its investment zones programme from five to ten years in Scotland and Wales, where two are planned. A ten yea window to claim reliefs has also been agreed with the Scottish and Welsh governments for freeports, meaning tax reliefs will be available until September 2034 for the Port of Holyhead in North Wales and the Celtic Freeport - covering the ports of Milford Haven and Port Talbot - in South Wales.
Mr Hunt also confirmed the acquisition of the site which was proposed by Hitachi for a nuclear power station on Anglesey(Wylfa Newydd) as part of a £160m deal, alongside the a site in Oldbury in Gloucester. The Westminster Government has a target of a quarter of electricity being produced via nuclear by 2050. If Wylfa Newydd is taken forward for a new post Hitachi project it could require the 海角视频 Government taking an equity stake and the consumer paying, through their energy bills, during the construction period to make the numbers stack up.
Welcoming the site acquisition deal, Secretary of State for Wales, David TC Davies, said: “The acquisition of Wylfa as a site for new nuclear development is fantastic news for Anglesey and the wider Welsh economy. It’s the next step on our path to an energy secure and net zero future, while also laying the foundations for a huge economic boost.
“The Budget will also see 1.2 million working people in Wales benefiting from the announcement of a National Insurance cut and families will be better off as we raise the threshold for claiming child benefit. There will also be around £170m in Barnett consequentials for the Welsh Government, on top of its record block grant, to spend on devolved responsibilities like health and education.”
The creative industries will be backed by over £1bn, including higher tax reliefs to lower the cost of producing visual effects in high-end TV and film, a 40% relief on gross business rates until 2034 will be introduced for eligible film studios in England, and a new tax credit for independent British films with a budget of less than £15m. Film studio companies in Wales, such as Bad Wolf and Great Point Seren, will be looking to the Welsh Government for similar business rate support.
Robert Lloyd Griffiths, director of ICAEW in Wales said: “It’s the rhetoric that grabs the headlines - more investment, more jobs and better public services. Nobody would argue with this but it is yet to be seen if we really have turned a corner on inflation and will soon turn the corner on growth. The Chancellor talked a good story today and there is no doubt that the additional support for small businesses with the increase in the VAT threshold to £90,000 plus funding for specific sectors and projects in Wales will be welcomed by many, as will the increase of £170 m as a result of the Barnett Formula.
“The announcement that a deal has been done by the 海角视频 Government to purchase Wylfa from Japanese firm Hitachi is good news for North Wales, as is the additional levelling up funding for Conwy, and both will help to drive growth and ensure future prosperity.”
Paul Butterworth, chief executive at Chambers Wales, said: “The Budget is not as comprehensive as the Autumn Statement in economic terms, but does contain a number of positive measures to tackle challenges surrounding investment and growth, including the increased VAT threshold and access to finance for SMEs. For investment to improve in the long-term and support a growing, innovative economy, interest rates and inflation will need to fall further still.
“Despite the Chancellor mentioning in the introduction to the Budget that he wanted to build a ‘high wage, high skill’ economy, detailed measures to tackle the ongoing skills shortage in the private sector were notably absent within his statement.
“It is promising, however, that both Welsh Labour leadership candidates are championing skills and business support within their manifestos and businesses in Wales will be hoping to see these measures actioned once the new leader is elected.”
Lloyd Powell, head of ACCA Cymru/Wales, said: "The announcements by the Chancellor are likely to be cautiously welcomed by Welsh businesses.
"Small businesses in particular will be pleased to have some breathing space on VAT, with the threshold increased slightly to £90,000. ACCA had called for this given the artificial brake on growth it represents for smaller businesses, combined with the knock-on impact to HMRC of dragging more businesses into this tax regime at a time when service levels are already at historically poor levels.
"We welcome the commitment to further improvements to the R&D tax relief scheme, as well as plans to improve regulation in the tax advice market, to recognise the value of professional agents.
"As well as the effects from the NI cut, VAT registration threshold increase, child benefit changes, alcohol and fuel duty freezes, the Chancellor announced that Wales will be allocated a ‘Barnett consequential’ of £170m. He also announced Levelling Up funding for Welsh projects – £10m for Venue Cymru and £5m for Newport. The Chancellor also announced a £160m deal for the 海角视频 government to purchase the site of the planned Wylfa nuclear site in North Wales.
"The Chancellor announced the scrapping of the Furnished Holiday Lets scheme, which gives extra tax reliefs on properties being rented out to holidaymakers. There are more than 11,000 self-catering holiday lets in Wales, according to the Welsh Government's latest list of properties paying non-domestic rates.
"Whilst a welcome simplification to the tax system overall may boost the availability of rented accommodation locally, the removal of the short-term holiday let regime will be a blow for some. The Welsh Government has already introduced changes to make it harder for holiday lets to be exempt from council tax."
Alistair Wardell, partner at Grant Thornton 海角视频 LLP and head of its restructuring team in Wales and the south of England, said: "With the economy technically in recession, it was no surprise that today’s budget included a raft of measures to boost growth and incentivise long term investment. North Wales in particular was singled out for support across both its culture and energy sectors, with Theatre Clywd to receive renovation funding and the government intending to purchase the Wylfa site on Anglesey, where there are plans for a nuclear power station.
“Smaller firms will appreciate the threshold for VAT registration going up from £85,000 to £90,000. At the other end of the scale, funding for clean energy, AI and innovative tech, as well as childcare support to lower job vacancies, will be welcomed by larger firms for whom these are key issues.
“In many ways this aligns with the priorities of Welsh business leaders, as in our latest Business Outlook Tracker we found that their top two challenges were sustainability and digital transformation.
“The Chancellor’s permanent cuts in taxation and support for dynamic economies are ambitious, but hopefully will bring positive change to businesses and encourage long-term growth.”