As we prepare for Philip Hammond’s Autumn Budget statement in a couple of weeks, we make a few educated predictions on what could be in the speech and on the horizon for the year ahead.
Things we knowWe know there are plans to increase the tax free personal allowance to £12.5K by 2020 and also the Higher Rate Threshold to £50K. We should expect the usual step changes to these thresholds.We also know that the tax free dividend allowance of £5K is to be reduced to £2K from 6 April 2018, impacting a large number of owner managed businesses.Corporation tax rates are set to reduce to 17% in 2020, so there is likely to be a confirmation of that policy.With Brexit the Government may not have much room to manoeuvre and given the Office of Tax Simplification is carrying out an in depth review of VAT there are unlikely to be any significant changes to that tax.What might we see?Stamp Duty Land Tax (SDLT)It is feared that SDLT is acting as a major deterrent to home movers and putting pressure on the UK housing market. Although SDLT revenue has hit a record high, the numbers of property sales have plunged. Certain exemptions may be introduced to remove SDLT for older homeowners, which would encourage people to downsize and free up homes for younger families.PensionsGiven that the Government was forced to maintain the State Pension triple lock, there may be some changes to Pension tax relief.Under the current system, relief is linked to the income tax rate of an individual. It is thought the Government may move to a flat rate of around 33% – a change that would hit middle earners harder.Public Sector Pay capOn the basis that some of the Public Sector Pay cap has already been lifted could we see the cap lifted for others too? Ministers may support a more staggered approach, prioritising areas such as nursing where there are staffing shortages.Contractors and the Gig EconomyThe changes to the IR35 rules which put much more onus on the ultimate contractor to assess the tax position correctly where a subcontractor operates through a personal service company, where that body is a public sector organisation. It is expected that changes will be made to the private sector to follow this.Making Tax DigitalWhilst the implementation of MTD has been delayed until 2019 for VAT and “at least 2020” for other taxes, we can expect to see more about it.Young peopleGiven the success of the Labour Party in canvasing young voters it is likely that Philip Hammond will look to help young people. Apparently the Chancellor has asked Conservative backbenchers for submissions on how to close the generational gap. Perhaps capping the Student Loans company loan interest percentage or an innovative tax break or financial incentive for this group of people?Whatever the outcome there will be some political motives, but it will still be difficult for the Government to work towards balancing the books.
Come and join us for our free Budget Day Networking Lunch at Kingsholm 11.30 to 3pm on 22 November – for more information click here