April 13, 2024
Money

Budget 2024: Chancellor could raise air travel taxes in Budget


Image source, Getty Images

Chancellor Jeremy Hunt will deliver his 2024 spring Budget on Wednesday 6 March.

There has been a lot of speculation about whether he will announce tax cuts ahead of the next general election.

Reports suggest several measures are being considered to raise money to fund tax cuts, the most recent of which is raising duty on flying business class. Mr Hunt is also understood to be examining scrapping non-dom tax status and taxing vaping.

The Treasury has declined to comment.

What is the Budget?

Each year, the Chancellor of the Exchequer – who is in charge of the government’s finances – makes a Budget statement in the House of Commons.

This outlines the government’s plans for raising or lowering taxes and sets out its spending commitments for health, schools, police and other public services.

The Treasury publishes a report alongside the Budget, which sets out further details about the measures and what they will cost.

The Labour leader of the opposition, Sir Keir Starmer, will respond to the Budget as soon as Mr Hunt sits down.

MPs will then debate the contents, before the government introduces a Finance Bill to turn the Budget proposals into law.

When is the 2024 Budget?

The 2024 spring Budget will take place on Wednesday, 6 March.

Image source, Getty Images

The chancellor’s speech usually starts at about 12:30 UK time and lasts about an hour.

It will be broadcast live on the BBC iPlayer and the BBC news website.

How is the UK economy doing?

What could be in the 2024 spring Budget?

The government has hinted that it wants to cut taxes. But it has also suggested there may not be enough money to make big changes.

Cutting the main rate of income tax by 1p would cost £7bn, according to the Resolution Foundation think tank.

Alternatively, the government could spend a similar amount cancelling the current freeze on the amount of money people can earn before they start paying tax or qualify for higher rates.

Allowing the tax thresholds to rise in line with inflation again would mean millions paying less tax.

The BBC understands that the government is considering a further cut to National Insurance (NI).

In the 2023 Autumn Statement, the chancellor announced an NI cut for 27 million workers which took effect in January. Self-employed NI rates will drop in April.

A further 1% NI cut would cost £4.5bn per year.

Air travel for people flying business class could become more expensive under another measure apparently being considered by the Treasury.

Reports have said that an increase in Air Passenger Duty for business class passengers is being examined.

Air passenger duty varies depending on how far you are travelling and what class you are in.

At the moment, business class passengers are charged £13 in duty for domestic flights, £26 for flights up to 2,000 miles, £191 for up to 5,500 miles and £200 for further than that.

The government is reportedly exploring the option of scrapping the tax status enjoyed by people who live in the UK, but whose home for tax purposes is overseas.

They do not have to pay any tax to the UK on money made elsewhere.

Scrapping non-dom tax status could raise £3.6bn a year, research by the London School of Economics and the University of Warwick suggests.

A windfall tax was introduced for oil and gas companies in 2022 after energy firms’ profits soared when Russia’s invasion of Ukraine pushed up prices.

The Energy Profits Levy applies to profits made from extracting UK oil and gas, and in its first year it raised £2.6bn.

It is due to run until March 2028. However, reports have suggested that the government is considering extending it for another year.

Vaping products are subject to value added tax (VAT) – but unlike tobacco, do not currently also attract a separate levy.

Fuel duty has been frozen since 2011, so a change could be unpopular.

But a 5p fuel duty increase has been pencilled in for later in March.

The Resolution Foundation calculates scrapping it would cost £2bn in 2024-2025.

A cut in inheritance tax (IHT) would benefit better-off families.

Nevertheless, the chancellor may look at changing that threshold to reflect rising house prices.

Abolishing it altogether would cost £7bn, according to the IFS.

But in January, the chancellor acknowledged the current child-benefit rules may be unfair.

The chancellor may decide to raise the threshold at which this applies.

And it may detail new controls in England designed to prevent local people being priced out of the housing market.

Owners may need council permission to turn their home into a short-term let.

According to reports in the Financial Times, the chancellor may introduce 99% mortgages.

This could make it easier for first-time buyers to get on the housing ladder, as they would need only a 1% deposit.

But critics have warned such a scheme could put borrowers at risk of negative equity, if falling house prices meant they owed more than the value of their property.

And other experts have pointed out it would not address the need to build more homes across the UK.

Does the Budget affect all parts of the UK?

Some parts of the Budget, such as defence spending, affect the whole of the UK.

Others, such as education, only affect England.

This is because Scotland, Wales and Northern Ireland make their own decisions on this policy area.

Scotland has income tax-raising powers, which means its rates differ from the rest of the UK.

If the government announces extra spending on areas that only affect England, the other nations get an equivalent extra sum of money to spend as they choose, according to a rule called the Barnett formula.



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