The Spring Budget, delivered on Wednesday, revealed several changes to fiscal policies, as well as key omissions, that will impact London.
Throughout a rather rowdy hour in the Commons, wherein Deputy Speaker Eleanor Laing had to interrupt several times to quiet MPs, Chancellor Jeremy Hunt unveiled his new budget. Among the highlights, including the 2p reduction in National Insurance Tax, several policies were announced that may impact on Londoners.
From regeneration projects, to changes to non-dom status, and a bittersweet outcome for the West End, let’s dig into what the Budget means for those in the capital.
Regeneration and hopes for housing
Jeremy Hunt announced two big regeneration schemes in London. This included a promise to transform Barking Riverside and Canary Wharf with £242 million of investment.
He said this would create 7,200 new homes in Barking and 350 in Canary Wharf. Both are part of plans to create affordable housing within the capital and provide housing for younger people as part of the “levelling up” agenda.
Opposition parties were quick to mock this policy, with Tim Farron, former leader of the Liberal Democrats, writing on X (formerly Twitter): “Brilliant levelling up news for the rural left-behind Northern Town of Canary Wharf…”
Brilliant levelling up news for the rural left-behind Northern town of Canary Wharf…. https://t.co/yXmZJCQJaP
Following the statement, critics also pointed out the lack of change to stamp duty or the Lifetime ISA cap, meaning housing affordability is still a challenge.
Currently people can only save £4,000 per year in a lifetime ISA and receive a top up of £1,000 from the government. However, this can only be withdrawn without penalties to buy a home costing less than £450,000.
The average house price of £508,000 in December 2023 (Office of National Statistics), therefore means the impact of Lifetime ISAs are limited for Londoners.
Non-dom status abolished
The non-dom regime will be abolished from April 2025, following much speculation ahead of the budget announcement.
“Non-dom” or non-domiciled, describes a UK resident whose permanent home for tax purposes is outside the UK. Currently, a non-dom only pays tax on the money they earn within the UK, but Mr Hunt announced that this regime will be removed.
From April next year, those coming to the UK will not have to pay tax on money earned overseas for the first four years. Following this, they will pay the same tax as UK residents. Those with non-dom status currently will have a two-year transition period to encourage people to bring their foreign wealth into the UK economy.
Rishi Sunak and his wife, Akshata Murty, were involved in controversy around her ‘non-dom’ status in 2022. Credit: Getty Images
The non-dom tax status came under a political spotlight in 2022 after it was revealed that the Prime Ministers wife, Akshata Murty, was one of the nearly 70,000 non-dom residents in the UK taking advantage of this tax loophole.
The chancellor says this change will improve the attractiveness of the UK for investors and raise an additional £2.7bn within the forecasted period to the tax year 2028/2029.
Fiona Fernie and John Bull, partners at Blick Rothenberg, a tax and accountancy firm based in London, explained the potential impact of this for London: “In the short-term this could mean a higher turnover of staff in the city as people come for the four-year exemption term only. In the long term, however, it will mean that those who plan to stay will bring more money into the capital”.
They said that this will not only impact spending, but also the housing market, as those who previously could not afford to buy in London due to taxes will now be able to purchase a property here. This could have a big impact in London, where 60% of non-domiciled people are based, therefore their spending and property investments are likely to be in the capital.
Show of support for the theatre
London’s theatre scene received a message of support in the budget as the Theatre Tax Relief rate of 40% will now become permanent. The rate was implemented during the pandemic (up from 20%) to help keep the industry alive, but until today it was expected that the rate would taper to 35% from April 2025.
A spokesperson for the Society of London Theatre (SOLT) told City News that they “warmly welcome the Chancellor’s transformative announcement of new permanent rates of Theatre Tax Relief”.
The Donmar Theatre were among the West End companies to comment in support of the Chancellor’s announcement about Theatre Tax Relief rates. Credit: Jessica Phillips for City News
Henny Finch, executive director at the Donmar Warehouse, said “the news that Theatre Tax Relief at 40% will continue in perpetuity is a lifeline for us. It directly supports us to make bigger and bolder work for our audiences at the Donmar, in the West End and beyond, including employing hundreds of artists each year. We are very grateful to the Government for their investment in our world-class sector.”
Tourism tax overlooked
A notable omission from the chancellor’s statement was the “Tourism Tax”. This will be a blow to retailers who were campaigning for it to be abolished.
Big shopping districts in London, such as Bond Street, are affected by the ‘Tourism Tax’. Credit: City News
Many London retailers have been calling for the restoration of VAT-free shopping for foreign tourists since the end of the VAT Retail Export Scheme (RES) in January 2021, after Brexit.
The scheme previously allowed non-EU visitors to the UK to claim back VAT on certain purchases. They say that without it, London is unable to compete with the likes of Paris and Milan as an international retail destination.
The chancellor asked the Office of Budget Responsibility (OBR) to carry out a review of the tax. They found that their 2020 conclusion to not reinstate VAT-free shopping “still appears reasonable”.
This is because the issue is “largely related to spending in a relatively small number of luxury stores”. They also say they have “not seen a significant change in the composition of UK visitors”. Assuaging the concerns of some critics.
Chief executive officer of the Heart of London Business Alliance, Ros Morgan, expressed his mixed feelings about the announcement in a statement to City News. He said, “we are pleased that the Chancellor has recognised the economic contribution of our creative industries by making cultural tax reliefs permanent. It’s disappointing that the Chancellor didn’t include measures such as the sustainable reform of business rates and the reinstatement of tax-free shopping for tourists”.
Sam Miley, managing economist and forecasting lead at the Centre for Economics and Business Research said: “The lack of action on the VAT Retail Export Scheme means that the UK economy is still positioning itself as the most expensive place to shop in Europe. This acts as a disincentive for tourists to visit the UK, resulting in significant levels of forgone spending and economic activity.”
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HeadlineSpring Budget 2024 analysis: impact for London’s housing and culture
Short HeadlineBudget analysis: what does it mean for London?
StandfirstChancellor Jeremy Hunt announced the Spring Budget 2024 on Wednesday, with policies that may have a significant impact on Londoners.
The Spring Budget, delivered on Wednesday, revealed several changes to fiscal policies, as well as key omissions, that will impact London.
Throughout a rather rowdy hour in the Commons, wherein Deputy Speaker Eleanor Laing had to interrupt several times to quiet MPs, Chancellor Jeremy Hunt unveiled his new budget. Among the highlights, including the 2p reduction in National Insurance Tax, several policies were announced that may impact on Londoners.
From regeneration projects, to changes to non-dom status, and a bittersweet outcome for the West End, let’s dig into what the Budget means for those in the capital.
Regeneration and hopes for housing
Jeremy Hunt announced two big regeneration schemes in London. This included a promise to transform Barking Riverside and Canary Wharf with £242 million of investment.
He said this would create 7,200 new homes in Barking and 350 in Canary Wharf. Both are part of plans to create affordable housing within the capital and provide housing for younger people as part of the “levelling up” agenda.
Opposition parties were quick to mock this policy, with Tim Farron, former leader of the Liberal Democrats, writing on X (formerly Twitter): “Brilliant levelling up news for the rural left-behind Northern Town of Canary Wharf…”
Brilliant levelling up news for the rural left-behind Northern town of Canary Wharf…. https://t.co/yXmZJCQJaP
Following the statement, critics also pointed out the lack of change to stamp duty or the Lifetime ISA cap, meaning housing affordability is still a challenge.
Currently people can only save £4,000 per year in a lifetime ISA and receive a top up of £1,000 from the government. However, this can only be withdrawn without penalties to buy a home costing less than £450,000.
The average house price of £508,000 in December 2023 (Office of National Statistics), therefore means the impact of Lifetime ISAs are limited for Londoners.
Non-dom status abolished
The non-dom regime will be abolished from April 2025, following much speculation ahead of the budget announcement.
“Non-dom” or non-domiciled, describes a UK resident whose permanent home for tax purposes is outside the UK. Currently, a non-dom only pays tax on the money they earn within the UK, but Mr Hunt announced that this regime will be removed.
From April next year, those coming to the UK will not have to pay tax on money earned overseas for the first four years. Following this, they will pay the same tax as UK residents. Those with non-dom status currently will have a two-year transition period to encourage people to bring their foreign wealth into the UK economy.
Rishi Sunak and his wife, Akshata Murty, were involved in controversy around her ‘non-dom’ status in 2022. Credit: Getty Images
The non-dom tax status came under a political spotlight in 2022 after it was revealed that the Prime Ministers wife, Akshata Murty, was one of the nearly 70,000 non-dom residents in the UK taking advantage of this tax loophole.
The chancellor says this change will improve the attractiveness of the UK for investors and raise an additional £2.7bn within the forecasted period to the tax year 2028/2029.
Fiona Fernie and John Bull, partners at Blick Rothenberg, a tax and accountancy firm based in London, explained the potential impact of this for London: “In the short-term this could mean a higher turnover of staff in the city as people come for the four-year exemption term only. In the long term, however, it will mean that those who plan to stay will bring more money into the capital”.
They said that this will not only impact spending, but also the housing market, as those who previously could not afford to buy in London due to taxes will now be able to purchase a property here. This could have a big impact in London, where 60% of non-domiciled people are based, therefore their spending and property investments are likely to be in the capital.
Show of support for the theatre
London’s theatre scene received a message of support in the budget as the Theatre Tax Relief rate of 40% will now become permanent. The rate was implemented during the pandemic (up from 20%) to help keep the industry alive, but until today it was expected that the rate would taper to 35% from April 2025.
A spokesperson for the Society of London Theatre (SOLT) told City News that they “warmly welcome the Chancellor’s transformative announcement of new permanent rates of Theatre Tax Relief”.
The Donmar Theatre were among the West End companies to comment in support of the Chancellor’s announcement about Theatre Tax Relief rates. Credit: Jessica Phillips for City News
Henny Finch, executive director at the Donmar Warehouse, said “the news that Theatre Tax Relief at 40% will continue in perpetuity is a lifeline for us. It directly supports us to make bigger and bolder work for our audiences at the Donmar, in the West End and beyond, including employing hundreds of artists each year. We are very grateful to the Government for their investment in our world-class sector.”
Tourism tax overlooked
A notable omission from the chancellor’s statement was the “Tourism Tax”. This will be a blow to retailers who were campaigning for it to be abolished.
Big shopping districts in London, such as Bond Street, are affected by the ‘Tourism Tax’. Credit: City News
Many London retailers have been calling for the restoration of VAT-free shopping for foreign tourists since the end of the VAT Retail Export Scheme (RES) in January 2021, after Brexit.
The scheme previously allowed non-EU visitors to the UK to claim back VAT on certain purchases. They say that without it, London is unable to compete with the likes of Paris and Milan as an international retail destination.
The chancellor asked the Office of Budget Responsibility (OBR) to carry out a review of the tax. They found that their 2020 conclusion to not reinstate VAT-free shopping “still appears reasonable”.
This is because the issue is “largely related to spending in a relatively small number of luxury stores”. They also say they have “not seen a significant change in the composition of UK visitors”. Assuaging the concerns of some critics.
Chief executive officer of the Heart of London Business Alliance, Ros Morgan, expressed his mixed feelings about the announcement in a statement to City News. He said, “we are pleased that the Chancellor has recognised the economic contribution of our creative industries by making cultural tax reliefs permanent. It’s disappointing that the Chancellor didn’t include measures such as the sustainable reform of business rates and the reinstatement of tax-free shopping for tourists”.
Sam Miley, managing economist and forecasting lead at the Centre for Economics and Business Research said: “The lack of action on the VAT Retail Export Scheme means that the UK economy is still positioning itself as the most expensive place to shop in Europe. This acts as a disincentive for tourists to visit the UK, resulting in significant levels of forgone spending and economic activity.”
