Early budget and expected changes…08 Oct 2018
Philip Hammond will deliver the Budget speech on Monday the 29th October 2018, and this year’s budget brings a change from tradition, as it will be held on a Monday instead of the usual Wednesday. This Budget is also presented earlier than normal to accommodate Brexit talks and negotiations scheduled to happen during November, with The Chancellor also under pressure to deliver a budget which will find funds to support vital public services and provide a buffer from the effects of Brexit.
Speculation as to the content of the Budget is rife already, and so, in our tradition, we take the opportunity to touch on some of the key points and what we think we know so far.
For the 9th consecutive year there will be no tax hike on fuel duty from April 2019 as confirmed by Theresa May on the 3rd October. It was expected that the Budget would scrap the freeze on fuel duty, as the Chancellor previously hinted that, ‘they were a luxury that could no longer be afforded’. The Prime Minister’s announcement was unexpected, but the freeze on fuel duty will certainly be welcomed.
Class 2 National Insurance Contributions
The government will not proceed with the abolition of Class 2 NICs which was being considered, due to the negative impact that it will have on self-employed individuals with low profits. The decision not to go ahead with the plan, on the 6th April 2019, will benefit the Treasury as it was forecasted that it would lose out on up to £360m a year until 2021 had the contributions been abolished.
Digital Services Tax & Online Sales Tax
We expect further announcements will be made on the proposed Digital Tax and Online Sales Tax, the so called ‘Amazon Tax’. The Digital Tax is primarily aimed at tech giants such as Google and Facebook and would force such international companies to pay more tax in the UK. An Online Sales Tax was also floated which would seek to tax online retailers to level the playing field between them and high street shops.
Capital Gains Tax
There are speculations that the CGT rates are bound to be reviewed and may go up. The rates are currently at 10% and 20% on gains (18% and 28% for gains on residential property). Now could be the time to encourage clients to review their property portfolios and perhaps consider taking a smaller tax hit now rather than later when the rates may be higher.
Rumoured proposals on a further stamp duty increase on buy-to-let purchases surfaced in early August. Landlords already have to pay additional tax when purchasing further properties, with the move to increase his again intended to curb buy-to-let purchases and encourage more owner occupiers.
A stamp duty surcharge of between 1% and 3% has also been confirmed for foreign property buyers.
Neither of these changes are likely to solve the housing crisis but will undoubtedly raise revenue.
With almost every budget, rumours are rife on the reform of the current system of pension tax relief and cuts on pension annual allowance. The Chancellor may target higher rate tax payers who contribute a lot to their pension pots and benefit from generous tax reliefs.
This is the last Budget that will be delivered by the Chancellor before the UK leaves the EU. All eyes will be on him when he delivers the Budget which should be aimed at building a stable and stronger economy post Brexit.