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The Chancellor of the Exchequer will deliver the final budget before the UK officially leaves the European Union.
This year’s budget is earlier than anticipated and for the first time, falls on a Monday (perhaps to avoid Halloween!). The timing is likely to be more practical than anything more sinister with Brexit occupying the minds and diaries of Westminster.
Hints were dropped at the Conservative Party Conference about some things we might see, but these are more likely to be ‘crowd-pleasers’ than fundamental reforms as UK/EU uncertainties are still to be worked out. With bold promises, like an extra £20 billion a year for the NHS, money needs to be found somewhere so don’t expect giveaways.
Speaking at the IMF annual meeting in Bali last week, Philip Hammond said that tax breaks given to those saving for retirement had become ‘eye-wateringly expensive’. Currently costing the Exchequer over £38bn a year, it may be the only place for him to go to raise the sort of money he needs.
It seems inevitable that changes to pension tax relief are to come in the future. A flat rate of tax relief for pension contributions would increase the retirement savings of lower earners. However higher and additional rate taxpayers may need to change tactics to maximise relief.
Published in July 2017, ‘Good Work: The Taylor Review of Modern Working Practices’ set out a wide ranging vision for providing gig economy workers with greater rights. However, tax legislation has not kept pace and the Chancellor might seek to address some of these challenges.
Some parts of the tax code have been heavily used by individuals to turn income that looks like employment income into company revenue. This is a legitimate way for people contracting to many companies to organise their finances, but it has been subject to abuse or overuse by some individuals to save tax. The public sector no longer allows engagements in this manner and it would not be a surprise to see this extended to the private sector.
Corporation Tax in the UK is now 19% and already planned to fall to 17% from April 2020. However, there are several companies that the media perceive to not be pulling their weight. Whilst they have significant revenues in the UK, they don’t always have a physical presence, and many are located overseas. The government have signalled that this needs to be addressed and there are strong indications that a Digital Services Tax is being considered.
The 5p ‘plastic bag tax’ has resulted in nearly 6 billion fewer plastic bags being sold last year compared to 2014 – an 86% decline. This is great for the environment because it has changed the way we think about single use products. It is widely expected that 5p will become 10p at this budget with smaller retailers likely to be brought in to the regime. We hope that similar measures are considered to tackle other single use products such as coffee cups and plastic straws.
Teresa May has said that fixing the ‘broken’ housing market is her ‘personal mission’. The outcome of Brexit on the housing market is likely to have more impact than some of the strategies mentioned recently. Stamp duty changes have been focused on purchasing second homes and buy to let properties. Expect a further surcharge – on top of the existing ones – to discourage non-UK residents buying residential property. Whilst this might slow parts of the market it does nothing to address those moving on from ‘first time buyer’ status to their next home.
If you are concerned about the Chancellor tampering with pension tax relief, you might consider making the most of the current rules – especially if you are a higher earner who could be worse off.
If you have questions about your pensions and retirement planning, speak to one of our experts by calling 020 7488 7171 or send an email to firstname.lastname@example.org.
A Technical Consultant at EQ Investors since August 2010, Dan’s Music Technology degree helps him approach Financial Planning problems creatively.
Dan is both Chartered Financial Planner and a Fellow of the Personal Finance Society (PFS). Dan works with the Chartered Institute of Securities & Investment (CISI) and the PFS to help develop their support for Paraplanners. Dan is an Accredited Paraplanner™ with CISI and won the 2014 IFP Paraplanner of the Year award.
Dan is also involved in youth work at his local Church in Hatfield.
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