Birmingham accountants and business advisers Friend Partnership, take a look at what the Chancellor might announce in his Budget speech on 29 October.
It is clear from recent press speculation that Mr Hammond in his Budget speech on 29 October will be announcing tax rises. This is on the back of Brexit uncertainty, weaker than anticipated growth forecasts and the need to respond to demands for greater than planned financial support for the NHS.
Tax relief on pensions
The hottest favourite for change is the tax relief available to pension savers. The pension tax relief that is currently given has been described by Mr Hammond as being ‘eye wateringly expensive’.
It is expected that Mr Hammond will reduce the tax breaks on pensions. This could be a reduction in the annual allowance, which is currently £40,000, or a limit on tax relief to basic rate only – higher rate relief is available at present.
Either of these moves could drastically affect those who are prudently planning for their retirement and attempting to build up personal pension pots which will support them in retirement leaving them with hopefully less need to call on state support.
I am not convinced that reducing the tax breaks will send a positive message to those able and willing to make provision for their retirement. It is clear that the recent moves to create ‘pension freedom’ has not seen pension savers accessing pensions in an irresponsible way, rather it has given them another tool to help them plan their finances.
The changes will thus be simply to raise revenue rather than prevent abuse of the new pension freedoms.
My concern with the foregoing is that it is an easy target. Is the Government doing enough to tackle the abuse perpetrated by those who view tax as discretionary.
Tax changes for online retailers
One wish I have for the Budget is that Mr Hammond will address the taxation position of online retailers.
In my view, some form of taxation is needed in order to ‘even up the competition’ and the threat to the high street that online retailers pose.
Online retailers are in a unique position, unlike high street retailers, as a result of the direct and indirect tax savings they can secure with their business structures and transaction fulfilment and routing.
I am sure that, as is always seems to be the case, there will be a surprise announcement on Budget Day. If there is a surprise, let us hope that it is a sensible measure that does not have to be abandoned a week after it is announced (most notably the 2% rise in NIC for the self-employed that was announced in the March 2017 Budget and ditched seven days later).
It is tough Budget to call in terms of potential content, but I would expect the tax measures on pensions and online retailers to be present.