I have already posted (see previous blog) my Budget summary document which is my initial analysis and summary of the main changes announced by the Chancellor today.
But now, please indulge me as I am doing something that I have never done before. I want to try and read between the lines and crystal ball gaze as to what the announcements (and the ones which weren’t made) might mean in terms of future tax changes and the timing of the Election.
Until today, I thought that this might be a “cut and run” Budget with an election in May/early June. I no longer think this is likely. I now think it more likely that the chancellor and the prime minister are waiting for another OBR forecast, inflation to fall below 2%, and interest rate starting to fall, so as to justify a “responsible” headline tax cut before the election. So, I predict another fiscal event (ie an early Autumn Statement) as soon as Parliament returns after the summer recess, in early October, with an election in mid/late November. The government can then, they will hope, claim that real household disposable income is forecast to return to pre-pandemic levels in the next year.
In his response to the Budget, Kier Starmer questioned Rishi Sunak over the fact that in a spring statement as chancellor in early 2022 he promised to cut the basic rate of income tax by a penny by the end of this parliament. The prime minister responded by shouting “four” and holding up four fingers, referring to the 4% national insurance cut. But Sunak’s statement in 2022 might still haunt him unless he can deliver on it. I suspect he is planning/hoping that by the autumn he can announce a 1p cut in income tax (probably from April next year) and so can claim that for workers, he has delivered a total of 5% in cuts, and not the 1% he promised. We shall see.
The government has already won over most big businesses with the full expensing of capital assets and the plan to now include leased assets within the scheme. And for SMEs, they will be hoping that some of the chaos at HMRC, particularly with regard to R&D tax credits, will be behind them and if not forgotten, at least things will be looking rosier.
The reduction in the rate of CGT on property from 28% to 24%, whilst relatively insignificant in itself, is a big hint that whilst there is a Conservative government, capital gains will continue to be taxed at a far lower rate than income tax, so those fears have well and truly been quashed. We might even see an extension of certain reliefs (for example, Business Asset Disposal Relief) which do not cost a huge amount but send out a strong signal about supporting innovation and entrepreneurship.
Of course, I’m a tax adviser, not a politician, and I may be completely wrong. I do have plenty of grey (who am I kidding?… white) hair though!
