2024 in review

Whilst Messrs Sunak and Hunt started 2024 on the high of lowering inflation to 4%, they were booking the removal vans to Downing Street as the Prime Minister planned for the General Election.

But before the General Election date of 4 July 2024 was called by a rain-drenched former Chancellor in May, the incumbent Chancellor, Jeremy Hunt, had one last throw of the political dice with his Spring Budget in March. Hunt’s £50bn bet on a 2% National Insurance (‘NIC’) would not pay-off, as the Conservative Party was pushed out of Government with Labour’s crushing 412 seat win.

But Hunt won’t be remembered as the Chancellor who cut NIC by 4% in the space of 3 months, worth up to £1,500 per worker; instead, this Chancellor’s legacy is the one who abolished “non-dom” tax regime once and for all.

By stealing one of Labour’s key tax pledges, the Jeremy Hunt’s last act as Chancellor was to replace the archaic concept of domicile and replace it with a four-year tax holiday where someone can freely bring their overseas monies to the UK. The new regime, which takes effect from next April, will be simpler but more limited in time as non-doms currently benefit from a 15-year period where they don’t pay tax on their overseas sources. This was clearly a tactical political move to take the wind out of Labour’s sails, and it is now a waiting game to assess whether the Conservatives and Labour governments combined have gone a step too far to attract global wealth to UK shores.

2024 had its fair share of celebrity tax cases, with Gary Lineker, Kaye Adams and Eamonn Holmes coming up against HMRC in tribunal on the application of the “IR35”, the so-called contractor company rules. Lineker and Adams beat the taxman, although the former is set for replay – Eamonn Holmes fell on the wrong side and was forced to sell his home in Belfast to cover the tax liabilities. The small celebrity sample of IR35 cases illustrates the mess, and only the Reform Party proposed any sort of tax reform in their General Election manifesto – we don’t expect any changes any time soon unfortunately.

Despite celebrity stardom, the tribunal still made time to judge on the VAT treatment of some of the nation’s favourite snacks and confectionary. Walkers argued that its Sensations Poppadoms should be zero-rated as they are different to the traditional potato crisp because they are typically enjoyed with a dip – but the tribunal disagreed based on the product’s significant potato content and its similarity in packaging, marketing, and texture to potato crisps. And for those who enjoy a sweet treat, a company selling giant marshmallows successfully argued that their product should be zero-rated as it could not be a confectionary item as it was intended to be roasted over a fire.

To the business end of 2024… we had a new Labour Government with a monumental majority and a mandate for change. It wouldn’t be long before our first female Chancellor, Rachel Reeves, stamped her authority on the country’s finances by declaring a £22bn black hole. Reeves went to work within a few weeks of the General Election, announcing VAT on private school fees from January 2025, re-affirming her desire to abolish the non-dom tax regime and taking an aim at private equity. The new Prime Minister and his Chancellor established an early tone which set a panic about what might happen in Reeves’ first Budget on 30 October 2024 – there were wild stories of capital gains tax (‘CGT’) doubling, abolishing the 7-year rule for inheritance tax (‘IHT’) and introducing an exit tax. Many rushed to sell down assets, make sizeable gifts to open-armed children and grandchildren and some made sure they weren’t physically in the UK on the day before Halloween (not that it would have mattered so much).

When Rachel Reeves took to the Parliamentary stage, she and the Labour Government were given a dressing down by the Deputy Speaker for leaking the Budget to the press in the preceding weeks. We knew that employer’s NIC would increase (to 15%), the non-dom rules would be made stricter, and it came as no surprise that fuel duty was frozen again, in keeping with the tradition of the previous Government.

It was both surprising and a relief that the main rate of CGT only increased to 24%, welcomed by entrepreneurs and investors who were fearing something much worse. But farmers, family businesses and pension savers were angered by Reeves’ IHT grab – those changes don’t come into play until 2026 and 2027, and I wouldn’t be surprised if the Government succumbed to the pressure of tractors bringing the Westminster roads to a standstill.

Reeves’ first Autumn Budget will go down as one of the most radical Government spending programmes in a generation – with over £40bn of tax increases and a £70bn annual increase in spending over the next five years. The success of this Autumn Budget will depend on how well the Government spends its new-found wealth and whether the state can do a better job than the private sector in generating growth.

It’s not easy being Sir Keir Starmer and Rachel Reeves when you have been in opposition for over a decade, and mistakes were bound to happen. The first 6 months of the new Government and the last 6 months of 2024 have not been easy – economic growth in the last quarter of 2024 is flat, inflation is starting to trend upwards again and there is already talk of replacing the Prime Minister before the next General Election. Starmer and Reeves need to spend quickly and wisely, as coming back to the country for more money through tax rises is simply not an option.

The story of this new Government is far from complete.

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