UK Cuts Taxes, Abolishes Non-Domicile Tax Status In Spring Budget

The UK’s Conservative Party-led government on Wednesday delivered what is expected to be the final official budget before a general election later this year, unveiling several tax-cutting measures in an attempt to woo voters.

In his Spring Budget statement in the House of Commons, Chancellor Jeremy Hunt also announced plans to abolish the non-domicile tax regime to make the system “simpler and fairer”.

The so-called non-dom tax came into the limelight a few years ago when it emerged that British Prime Minister Rishi Sunak’s Indian wife, Akshata Murty, was registered as non-domiciled in the UK for tax purposes.

This meant the daughter of Infosys co-founder Narayana Murthy did not have to pay UK tax on her Indian income accrued from sizable shares in the software giant. She has since voluntarily relinquished that legal tax status to avoid it becoming a “distraction” for her husband’s political career, but it continued to dominate the Opposition's discourse as one of the key provisions they wanted to abolish under a future Labour Party-led government.

“The ‘non-dom’ tax regime will be abolished and replaced with a fairer system from April 2025 where new arrivals to the UK pay the same tax as everyone else after four years – raising GBP 2.7 billion a year by 2028/29,” Hunt announced, in a move clearly targeted at taking the thunder out of Labour’s fiscal plan ahead of a general election.

“Following a 2% point cut in the Autumn Statement (in 2023), the main rate of Employee National Insurance will be cut again by a further 2% points from 10% to 8% in April – a one-third reduction in the main rate of National Insurance which means the average worker on GBP 35,400 will receive a tax cut of over GBP 900 compared to last year,” added Hunt.

Dubbed as a ‘Budget for Long Term Growth’, most of the announcements in the Commons statement had been forecast by experts and reported across the UK media over the past few days. The Chancellor, who was cheered on by boss Rishi Sunak, declared that the party’s 'permanent cuts in taxation' were possible because of the progress made in bringing down inflation, with forecasts suggesting it will fall to the target level of 2% within months.

He also earmarked almost GBP 6 billion for the state-funded National Health Service (NHS), with artificial intelligence set to be used to “cut form-filling for doctors” in a digitisation drive.

A 5-pence cut to fuel duty has been extended for another 12 months and the price of beer, wine and spirits will be held steady until February 2025. While vaping will be taxed following a consultation, tobacco is set to get more expensive in a one-off hike.

To encourage investment, savers can invest up to GBP 5,000 in UK companies tax-free through a new so-called British ISA (individual savings account).

And, according to accompanying forecasts, the UK economy is expected to grow by 0.8% this year and 1.9% in 2025.

In his response, Opposition Labour Leader Keir Starmer said the public will recognise a “Tory con” when they see it and described the Budget as the last act of a “party that has failed.” “Britain in recession, the national credit card maxed out, and despite the measures today, the highest tax burden for 70 years ... That is their record. It is still their record. Give with one hand and take even more with the other and nothing they do between now and the election will change that,” said Starmer.