What Hunt will target to fund tax cut giveaways – from holiday homes to vapes

The Chancellor is expected to bring in a range of new revenue-raising measures in his upcoming Budget in a bid to fund pre-election tax giveaways.

Jeremy Hunt was reportedly hoping to bring in a 2p cut to national insurance in addition to the same cut he brought in at the Autumn Statement.

However, hopes for this have reportedly been dashed after the Office for Budget Responsibility (OBR) delivered a worse-than-expected fiscal outlook to the Treasury.

It’s understood that the Chancellor is still considering a 1p cut to national insurance, and Treasury officials will spend the weekend trying to balance the books ahead of Mr Hunt’s statement on Wednesday.

Mr Hunt is also reportedly considering bringing in several new taxes and reforms, which could offset the cost of any tax cuts he brings in.

Non-dom tax reforms

Potential amount raised: £3.6bn a year

The Chancellor is reportedly considering scrapping the non-dom tax status in a bid to raise funds to finance other tax giveaways.

Labour has long pledged to scrap it in a bid to raise funds for the NHS, and the Conservatives have criticised the policy in the past.

Reports in The Telegraph and The Times suggest that scrapping the non-domiciled tax regime would raise an estimated £3.6bn a year.

But a 2022 report by the London School of Economics (LSE) suggested that it could raise £3.2bn a year, with around £10.9bn in offshore income currently not taxed due to non-dom status.

The same report also found that past tightening of the rules around non-doms had led to very few – just 0.2 per cent – leaving the UK as a result.

LSE has also calculated that if the time limit before an individual with non-dom status had to pay tax in the UK was cut from 15 to four years, it could raise £2bn a year.

So called “non-dom” status can be claimed by anyone who was born abroad, or whose father was, and who has lived in the UK for less than 15 years.

People with more than £2,000 foreign income must report it in a tax return. You then have a choice of paying UK tax on it, or claiming what is known as the “remittance basis”.

Claiming the remittance basis means you only pay UK tax on the income or gains you bring to the UK, and you must pay an annual charge if you have been living in the UK for a certain amount of time.

New vape tax

Potential amount raised: £500m a year

In a bid to raise revenue and also make it harder for children to buy vapes, the Chancellor is expected to announce next week that a “vaping products levy” will be brought in on the import and manufacture of vape products.

i first reported last month that Hunt was considering placing a new levy on vapes in a further attempt to crack down on the growing use of e-cigarettes among younger people.

Under the plans, previewed in the Times and Telegraph reports, the tax will be levied based on the liquid in the vapes, with high levels for those with more nicotine.

There will also reportedly be a one-off increase in tobacco duty to keep vaping cheaper than smoking, and these two changes could bring in up to £500m a year between them by 2028-29.

It comes after the Government announced it would ban disposable vapes, with the products expected to be removed from sale by the end of 2025.

New laws have also been brought in to make it illegal to sell tobacco products to anyone born on or after 1 January, 2009 as part of the pledge to create a “smoke-free generation”, while vaping alternatives such as nicotine pouches will also be outlawed.

Public sector productivity

Potential amount raised: £1.8bn total by 2029

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The Treasury has announced a new investment as part of a “public sector productivity drive” which it claims will offer significant savings over the next five years.

In a statement, the department said the £800m investment in public services represented a “new focus” on the “long-term decisions required to strengthen the economy and give people the opportunity to build a wealthier, more secure life for themselves and their family”.

Changes to be brought in include ramping up the use of artificial intelligence across Whitehall and giving police officers new technology such as drones to “free up thousands of police officer hours spent on admin”.

The Government will also be introducing 200 additional child social care places in England and ensuring faster NHS test results for 130,000 patients, including those waiting for cancer results.

The Treasury claims that the changes will deliver £1.8bn in benefits by 2029.

Holiday let crackdown

Potential amount raised: £300m a year

Another revenue-raising effort said to be under consideration is scrapping the furnished holiday lets (FHL) regime, which gives extra tax reliefs on properties being rented out for holiday-goers.

These include income tax reliefs for costs incurred furnishing the property which aren’t available to private rentals, as well as the ability to reduce capital gains tax in some circumstances.

The reductions only apply to properties which are available for holiday letting for at least 210 days a year, and which are let for at least half that time.

According to The Sunday Times, scrapping these tax reliefs to bring FHL properties in line with other rental properties could net the Treasury around £300m a year.