Autumn 2018 Budget: What could we expect?

29th October 2018

The Chancellor will later today deliver his vision for the UK economy within a challenging budget environment.  Following the recent EU Summit and with further Brexit EU discussions in the pipeline, is there enough certainty in the future to be able to reliably and effectively set fiscal policies?  We will be giving our commentary and reactions after the Budget unfolds later today but these are our predictions for some of the news we may hear.

autumn budget 2018

A step away from austerity?

We should see a movement from austerity to spending, given that economic growth has seen sustained positivity since Q2 2018 and budget deficit has been lower than expected.  However, £20bn has already been committed to the NHS by 2023 and fuel duty is to be suspended for the ninth year running.  Added to these existing pressures is that Philip Hammond may wish to keep some budget in reserve in case required after Brexit.  Any movement away from austerity we therefore expect to be cautious for the moment until the impacts of Brexit are better understood.

Digital Business Tax?

Talk of an uncompetitive playing field for high street stores and growing concern of tax avoidance by digital businesses mean that pressure is growing for the introduction of a new Digital Services Tax.  This could therefore be an “easy win” area for Mr Hammond and many will be expecting something to be announced in this respect.  The UK has repeatedly confirmed its desire for international agreement on how to tax digital businesses however and rushing through a UK lead may leave the UK in an uncompetitive position.  It may be that the Chancellor lightly covers this topic now, with more detail expected in Spring, giving more room for international alignment before details are finalised.

Ready for Tax Increases?

Recent polls showing that the UK population is ready to pay more tax may be exactly the news Philip Hammond needs to take the opportunity of raising taxes in this Budget announcement.  Areas tipped to be reviewed include the Pensions Annual Allowance for higher rate tax payers, as well as the annual exempt amount for Capital Gains Tax.  This could be a more welcome approach in targeting the wealthy rather than raising rates across the board.  The £20bn commitment to the NHS will require a bigger cash injection than this could raise however and we could see an area such as NIC contributions affected to reach the levels of budget required.

Plastic Tax?

Wide-scale public support for a tax targeting single use plastic could make this a no-brainer for the Chancellor, in addition to its role in being a major pollutant.  Mr Hammond previously stated his commitment to this area in August so it is likely this will be included in the Budget.

Summary

Given the uncertainty facing the UK economy at the moment, both on a European and global scale, it is likely that Mr Hammond will be cautious with his spending, despite the positive outlook for both the deficit and borrowing forecasts.  The Budget itself has been moved forward a few weeks to give more time to plan for Brexit and we fully expect to see a “safety-first” announcement this afternoon that will not create more difficulties for the government as it struggles to finalise a deal with the EU.    If you would like to talk to us about an area of the budget that may affect your personal or business finances, please contact one of our team.

 

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