This Autumn, the budget will be delivered earlier than usual, on the October 29, 2018. It will fall just 10 days after the next scheduled EU summit and before the November deadline for the UK to produce a final Brexit deal. With such a crucial time in Brexit negotiations and the level of uncertainty currently, this is a problematic time for the Chancellor to set a budget.
Added to the Brexit uncertainty is Theresa May’s continued pledge to end austerity, renew the NHS, increase housing stock and freeze fuel duties. With such a big cash injection required, speculators are expecting radical tax changes with more pressure on Philip Hammond to increase revenue from other tax sources.
A tax policy which is highly likely to be targeted is pension tax relief. Currently, a high earner on £150,000 can claim tax relief on an annual allowance of £40,000 tapered thereafter by £1 for every £2 earned over the £150,000 threshold. Either the threshold is likely to be lowered or the allowance will fall.
A politically hazardous policy likely to be introduced is a major change to VAT rules for small businesses. Presently, there is a £85,000 turnover threshold before a business must register for VAT. The Chancellor is said to be considering lowering the threshold to £20,000 to bring it in line with the EU. A report published indicates that the intention of this policy is to stop companies limiting growth to avoid crossing the threshold.
Another policy which aims to become more in line with EU regulation is the taxation of the digital economy. In March 2018, The Treasury published a paper stating their aim to target digital businesses that derive value from UK participants. Philip Hammond has hinted that the UK could introduce a 1% tax on digital sales revenue.
Brexit will play a key role in shaping fiscal policy. A policy which maybe changed due to Brexit is Corporation Tax. Currently, the rate is 19% and is due to fall to 17% in 2020. However, with Government keen to retain and attract new businesses after Brexit, there could be a further reduction.
A new tax break could be introduced to landlords who sell their property to sitting tenants. Currently there is a 28% capital gains tax on any profits made from selling property. A change could mean the landlord can claim tax relief and split the money with the tenant for them to use as a deposit.
With Brexit negotiations at a perilous point, this year’s budget predictions are more interesting than ever.