Autumn Budget Comments
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After expectation of some fairly radical tax changes, particularly in Capital Gains Tax and Inheritance Tax, the Autumn Budget was more of a political spending round rather than any further attempt to raise tax revenues to pay off the serious debt burden we have.
Instead, the Chancellor placed reliance on the growth of the economy and the effect of preannounced tax changes to fund even further spending plans that try to achieve the government’s stated aims. Clearly there was a rash of specifically and maybe politically targeted grants for certain regional areas to help ‘level up’. There was also an attempt to stave off criticism of the reduction in Universal Credit by refocusing on reducing the UC taper for people in work by 8%.
Much comfort was taken from Office of Budget Responsibility (OBR) forecasts, some of these being:
INFLATION to peak at 4.4% in the coming year, then falling gradually back to around 2% in 2024.
BANK BASE RATE to rise by the end of this year and gradually reach a peak of 0.75% by mid-2023 and stay at that rate for some time.
GDP to return to its pre-Covid level at the start of 2022.
The focus was more about changes the government is now able to make because of leaving the EU (air passenger duty, alcohol duties, tonnage tax reforms and even extensions to R&D tax relief).
There were some tax changes that did make it into the budget, even if not all were in the speech, such as extending the deadline for reporting property disposal capital gains from 30 to 60 days. Welcome changes in the speech were the extension of the temporary £1m Annual Investment Allowance for purchases of new qualifying equipment and of course the 50% reduction in Business Rates for certain qualifying businesses in retail, hospitality & leisure.
The Chancellor wanted this to be seen as a “Budget for the future” and to “reward work”. He set out his intention to reduce taxes before the end of the Parliament. The UK is currently 22nd in the list of the 37 OECD countries with the lowest tax burden, and when the tax changes announced take effect from 2023, we will fall to 30th. Such a high tax burden doesn’t encourage investment, so let’s hope that economic growth doesn’t falter as a result.
A summary of the Budget measures and pre-announced changes to come is contained on our website here.
Content provided by MENTA Patron - Jacobs Allen Chartered Accountants and Chartered Tax advisers.
