Chancellor Philip Hammond will deliver his pre-Brexit autumn budget at the end of this month and it looks set to be one of the most important in living memory. This is the government’s last chance to issue its spending plan before the UK leaves the European Union. And it will give us all some indication of the direction the country could head once this momentous shift has taken place.
The Chancellor initially wanted the Budget to be held on the 31st, and given the severity of the situation in the government it was pointed out that perhaps Halloween wasn’t the best day for it. Although perhaps some of the horror stories contained within it might have been appropriate. But what can we really expect from this year’s Budget? Here are a few suggestions about what might come up.
The Prime Minister has already announced that they will freeze fuel duty for the ninth year in a row, so this is one thing we can reasonably expect to be confirmed. This freeze comes at a cost for the Treasury but has been put in place to combat the high price of oil globally.
The Government has already pledged an extra £20bn a year for the NHS but in the Budget we finally get to find out where it is coming from. And although it might sound like a lot of money, it is still less than the average 3.7% increase that has been put in place every year since it was founded in 1948.
This is another policy that has already been floated but we now get to see the finer detail. The plan seems to be to target the advertising revenue of tech giants such as Facebook and Google, measured from the revenue of UK users looking at their advertising content. It is finally time to make these global companies pay their fair share, but getting them to do this has proven to be difficult in the past.
Perhaps one of the Prime Minister’s most interesting recent claims is that the age of austerity is finally over. The last ten years’ policy of tightening the purse strings is finally at an end, but how this is going to happen appears to be something of a mystery. Maybe the Chancellor will see this an opportunity to finally bring us into the loop.
The Conservative Party made a manifesto in 2017 for the general election to the effect that: “By 2020, we will, as promised, increase the personal allowance to £12,500 and the higher rate to £50,000. We will continue to ensure that local residents can veto high increases in Council Tax via a referendum. And we will not increase the level of Value Added Tax.”
So, we will see if they live up to these promises.
There will be no avoiding the elephant in the room at this year’s Budget and people will want answers as to how Brexit is going to affect tax in the UK. There are obviously going to be far-reaching tax implications of this momentous decision and it is getting very late in the day to know what these might be.
Tax increases and cuts
Of course, the main cut and thrust of any Budget is where tax is going to be reduced and where it is going to be increased. The main issue at stake is from where the Chancellor is going to get the extra £20bn promised by the Prime Minister for the NHS. There is also a significant amount of money required for social care, especially for the elderly, so it might become clear what is going to happen here.
The Chancellor has already floated the idea of an internet sales tax, nicknamed the Amazon tax as it is targeting internet businesses such as the sales giant. If the Chancellor is able to use this extra money to pay for social care and the NHS then this may prove to be a very popular move.
There has been some discussion about lowering the threshold for VAT payments, which will affect many small businesses around the UK, but this is one issue that is far from guaranteed.
For working people, it is also very important to know that the money they are saving is guaranteed and will be working hard for them over the coming years. A Budget rarely goes past without some change to the pension tax arrangement. In recent years these have been largely seen to benefit the high earners in our society, so there may be some relief limited to the basic rate of income.
It won’t be surprising to see some changes to the rate of corporation tax in the UK. Receipts for this are at a record low and while some see this as something to be rectified, others believe that it is this that is stimulating profitable business in the UK.
Overall, Hammond has always demonstrated a steady hand during his time in office and his Budgets have had few surprises. However, with Brexit fast approaching, this year may be the exception.
Businesses of all sizes will be wanting to keep a close eye on what is going on, working out whether the changes will negatively affect them. With the uncertainty of the next twelve months to contend with, this Budget needs to be solid and unspectacular. The Chancellor therefore needs to walk the fine line between keeping the general public onside and keeping business happy. It is not an easy task.
If you would like more advice on the Budget and how it might affect your business, then get in touch with a member of the Together Accounting team. We understand that little changes can make a big difference, and with our vast experience, we can help guide you through the changes announced this year and what this might mean for your company.