Tax advisers have over the years regularly muttered the phrase “If only I had a crystal ball” and to know Budget changes before the Chancellor announces them. Well today we just about got that with the major gaffe by the Office of Budget Responsibility (bit of a misnomer there given their actions!)
Despite advance publication and tax changes aplenty, having the crystal ball would not have done much on this occasion, as most significant changes are not being implemented overnight.
Ultimately, the unprecedented barrage of leaks to the press about potential tax rises has proved to be a major distraction. Instead, by extending fiscal drag for another 3 years until 2031, the Government has ensured that millions across many different earnings bands will pay more income tax and national insurance in the years ahead. As we have commented upon before this is a sleekit way of raising the income tax take, but it will no doubt allow the Government to try and defend a stance that it has not raised income tax or national insurance for ‘working people’. Whether working people sucked into the higher rate tax brackets will see it that way in years to come is another matter.
Also, those who work through companies and are faced with the 2% increase in the dividend tax rate from next April or those who run rental property businesses who are faced with a 2% increase from 2027 will feel, with some justification that they have been singled out again for different treatment.
Overall, aside from employers with employees who currently benefit from salary sacrifice on pension contributions which are to be limited to £2,000 per annum from 2029 and a further increase to the national minimum wage there is, thankfully little in the way of additional tax burdens for employers and companies (gambling sector excepted).
Other notable announcements are a mileage charge for electric and hybrid vehicles from April 2028 and a new ‘mansion tax’ on properties valued at more than £2 million. Although the latter only applies to England, when it comes to property taxes, the Scottish Government have proven they are never far behind, so let’s see what January brings.
Consultations are to take place on changes to the tax system, including proposals to revisit the self-employed paying tax throughout the year rather than in 2 instalments.
Finally, many of our clients will be celebrating Thanksgiving. We would certainly like to wish them a Happy Holiday and hope that the announcements today haven’t spoilt their celebrations too much!
Having briefly covered the major announcements above, we will, as always now go and review the finer detail that has not already been published by the OBR and report back with a further update.
