Budget 2018 look ahead

There has been a fair amount of speculation in the press about how (whether?) Chancellor Rt Hon Philip Hammond MP will find money to cover the additional £20bn funding for the NHS that Prime Minister Rt Hon Theresa May MP announced in June. A lot of this speculation has focused on a cut to pension tax relief. The Telegraph newspaper cited a "senior Treasury source" as claiming the £39bn annual cost of tax relief could not be ignored when seeking methods to fund the promise to the health service, and the Chancellor himself has said that “My general feeling on pensions tax relief is that it is eye-wateringly expensive.”

The Budget is due to be delivered on 29 October, and in addition to predictions over potential pensions changes, other methods rumoured as being considered to plug the gap include delaying plans to raise income tax thresholds and a controversial shake up of VAT rules for small companies. The Chancellor is also believed to be planning a fresh crackdown on tax avoidance by freelancers, forcing freelancers who set themselves up as “personal service companies” to pay more tax by tightening the rules to give their employers direct responsibility for ensuring that they do so, though there has been some back bench debate in the Conservative Party about how this might affect supporters.

Earlier this year the Commons Treasury Select Committee called for "fundamental reform" of the tax relief system. In a wide-ranging report on household finances, MPs on the committee said incremental changes could be made to increase fairness in the system, including moving to a flat rate of relief, as well as replacing the lifetime allowance with a lower annual allowance.

The first Autumn Budget (as opposed to the previous Autumn Statements), the Chancellor brought forward the Budget forward in order to avoid entanglement in fallout from the Brexit negotiations, but clearly it is still going to have a major effect on what he can do. Coming after the October EU Summit, but ahead of further Brexit discussions with the EU, it is generally believed that as the Chancellor doesn’t have any certainty about the outcome this is likely to tie his hands to some extent.

Last updated : 16 Oct 2018

 

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