A pre-election Budget is always a little bit different, if not only for the heightened level of noise within the House of Commons and the amount of mud being slung from either side of the benches.
For chancellor Jeremy Hunt and the Conservative party, it was a chance to woo voters with crowd-pleasing measures.
However, it also comes against the backdrop of the UK being in a technical recession, defined as negative economic growth for two quarters in a row, and increasing frustration at the rise in the cost of living.
One of the expected changes within the Budget was the national insurance cut.
The chancellor opted to cut class one national insurance contributions by a further 2p to 8 per cent, doubling down on the cut from 12 per cent to 10 per cent announced in the Autumn Statement.
These two cuts together are estimated to save the average worker around £900 a year (based on average weekly earnings from the ONS).
Hunt also announced a 2p cut from 8 per cent to 6 per cent for self-employed class four NICs, in addition to the 1p cut announced in the Autumn Statement.
Britsh Isa
A surprise of sorts was the introduction of the British Isa allowance, this will give everyone an additional £5,000 Isa allowance on top of their existing £20,000 allowance.
However, it does come with a caveat of sorts, the money must be invested within British business to “ensure British savers can benefit from the growth of the most promising UK businesses, as well as supporting those businesses with the capital to expand”.
The government is looking to get consultation on the restrictions within this new Isa allowance, the initial documents which have already been released suggest that it may also be possible to invest in UK government bonds within this new wrapper.
This leads to a challenge for the investment industry: UK equities have notably lagged behind both global and US equities by quite a large amount over the past 10 years, with the lag being most notable since the pandemic in 2020.
Whilst past performance is no indicator of future performance, it does lead to questions on how best to use the additional allowance.
It is notable that a lot of pensions funds and investment managers have shifted their portfolios to a more global strategy, with an underweight exposure to UK stocks.
With the stealthy decrease in capital gains tax allowance (reduced from £12,000 to £6,000 this year, and a further reduction to £3,000 due in April 2024), investors can find themselves in a difficult position where they hold assets outside of a tax efficient wrapper.
There is the chance that the British Isa could lead to a lift in the UK stock market as interest, and funds, are diverted to potential filled UK opportunities.
We should also focus on what the chancellor didn’t do - cuts to income tax rates or increases to the thresholds for paying different rates of income tax did not materialise.
