2024 UK Budget predictions: what will Jeremy Hunt do with income tax, national insurance and housing

This week’s Budget could be pivotal in deciding the general election later this year.

Jeremy Hunt will hope it can arrest his party’s slide in the polls, which saw the Conservatives slump to their worst ratings with pollster Ipsos in 46 years. The Chancellor got little credit for cutting national insurance contributions in the autumn, and he is under pressure from his backbenches to cut tax again.

Both the Chancellor and the Prime Minister were heavily hinting at further tax cuts earlier in the year, however the noises out of the Treasury have since gone quiet. The problem for Hunt is that the fiscal headroom - the amount of money he has to spend within the government’s self-imposed rules - has reduced, as borrowing costs have gone up.

There is also the question as to whether cutting taxes will boost the Tories’ electoral chances. Most recent polls have shown the public are in favour of protecting ailing public services over slashing taxes. However, it’s likely that to afford any form of tax cuts, Hunt will have to reduce departmental budgets going forward.

So with all this in mind, what are we likely to see in the 2024 Budget?

Can Hunt afford to cut income tax?

Just over a month ago, it appeared almost nailed on that Sunak and Hunt would cut income tax. The Prime Minister had said at the start of the year that his “priority” is to “keep cutting people’s taxes”, and Tory backbenchers are convinced that their best chance of a recovery in the polls is by cutting income tax.

However, since then, the Treasury’s fiscal headroom has reduced after the latest forecasts by the Office for Budget Responsibility, the UK has entered a recession and inflation has remained sticky at 4%. The Chancellor will be very concerned about making any tax cuts that could risk fuelling inflation - after all he got his job after Liz Truss’ disastrous mini-Budget.

Hunt told Sunday with Laura Kuenssberg that any tax cuts will have to be “sustainable” and “affordable”. Now often at the Budget, Chancellors want to keep a rabbit in the hat, to pull out on the biggest stage to get maximum attention. However this time I think an income tax cut is out of reach of Hunt.

The other big question around income tax is what will happen to the thresholds. Over the last year, Hunt has frozen income tax bands, which has led to the overall tax burden (the amount of tax people are paying compared to GDP) at its highest level since the Second World War.

The reason for this is that over the last few years, inflation has skyrocketed and that has pushed wages up (albeit at a lower rate). That has then pushed people into higher tax bands - for example from the tax-free allowance into the 20% rate, and from there into the higher and top rates. This means that merely by freezing income tax thresholds, the Treasury is raking in a lot more tax than the year before.

Hunt is under pressure from Tory backbenchers to reduce these tax bands. It’s not a great look for the Conservatives to be seen as the party of high tax. However it doesn’t look like the Chancellor has enough leeway to budge on this.

Prediction: no change to income tax and thresholds remain frozen

National Insurance cut again?

If Hunt is unable to make a dent in income tax, he will almost certainly take a look at cutting National Insurance contributions. In the autumn, the Chancellor slashed this by two percentage points - from 12% to 10% - and it’s thought he wants to go further.

Cutting National Insurance is cheaper than income tax and is thought to be less inflationary as only people in work pay it. It also has a bigger impact on workers on lower salaries. The Chancellor will have to bring in some form of tax cut in this Budget, and I think it will be National Insurance.

Prediction: another 2% point cut in National Insurance

Copying Labour: non-dom exemption and windfall tax

As Hunt’s fiscal headroom is a lot smaller than expected, the Chancellor is looking at tax rises. So much for being the so-called party of low taxes. In particular, Treasury officials are eying up reforms to the non-dom status, which allows wealthy individuals with earnings overseas to pay less tax.

This is something Rishi Sunak’s wife Akshata Murthy previously benefited from and the Chancellor previously said that abolishing the exemption would be “wrong” and drive high-earners out of the country. However, with money tight, this is being reassessed. 

There is also a political motive for doing this. Scrapping non-dom status has been promised by Labour, and is one of the party’s only major money earners. Money from this has been committed to measures including NHS improvements, so adopting the policy could lay a trap for Sir Keir Starmer, who would have to find an alternative way to pay for these pledges.

The government is also reportedly looking at extending the windfall tax on excess oil and gas profits, another policy which Labour has pushed.

Prediction: reform of non-dom status announced

Housing: 1% mortgages or stamp duty holiday?

Successive governments have tried and failed to solve the UK’s broken housing market. The government has two major bills going through the House of Commons at the moment - on rental and leasehold reform - but people of all ages will be watching the budget closely for any announcements on housing.

Earlier this year, the government floated the idea of 1% deposits for mortgages, however it was roundly criticised for placing too much borrowing on the buyer and it sounds as if the government has dropped it. Liz Truss and her cabal are pushing for another stamp duty holiday.

It’s widely argued that this tax needs reform, however some analysts have argued the last stamp duty holiday fuelled a mini-bubble which contributed to the issues after the mini-Budget. It’s something that Hunt may be considering, however it is likely to be too expensive at this Budget. 

Many property experts have called on the government to increase the Lifetime ISA property price limitation, which currently caps first-time buyers from getting government bonuses on £450,000 and below. This has not kept pace with inflation, with the average London property price now £729,802 and the average in the South East is £480,955 according to Rightmove. 

Prediction: only tinkering around the edges with ISA limit increased

Ralph Blackburn is NationalWorld’s politics editor based in Westminster, where he gets special access to Parliament, MPs and government briefings. If you liked this article you can follow Ralph on X (Twitter) here and sign up to his free weekly newsletter Politics Uncovered, which brings you the latest analysis and gossip from Westminster every Sunday morning.