The Autumn Budget, what could be on the cards?
The first Autumn Budget will be delivered on Wednesday, 22 November 2017 by Phillip Hammond, Chancellor of the Exchequer. During his last Autumn Speech, Mr Hammond said “No other major economy makes hundreds of tax changes twice a year, and neither should we”. The result is that the main budget is now taking place each Autumn and in future, there will be a smaller scale Sprig Statement.
However there was a Spring budget earlier this year and media reports are now divided with some saying that there will be some big changes especially on housing, tax and borrowing and others suggesting that it will be more minimal. But, there will be some changes and here are some of the amendments that may be on the cards.
It is being speculated that Stamp Duty may be slashed or even scrapped for first time buyers and this is thought to be part of a plan to promote intergenerational fairness and win back the younger voters.
Reports also show that stamp duty is acting as a block for older homeowners to move, which is then putting pressure on the UK housing market. With stamp duty revenue hitting a record high, and property sales plunging, calls are now growing for the Government to remove stamp duty for older homeowners, so as to encourage them to downsize and free up homes for younger families.
In addition already announced is a £10 billion boost to the current Help to Buy scheme and we should see more details released for this and for the £2 million set aside for new social rented homes.
At each of the last few Budgets it has been suggest that pension tax relief is an area ripe for review with the Government potentially moving to a flat rate of around 33 per cent.
Currently tax relief on pensions is linked to your effective income tax rate. Therefore, top rate taxpayers would get relief at 45%, a higher rate tax payer would get relief at 40 per cent and those on the basic rate are given relief at 20 per cent.
It is being reported that any such reduction in pension tax relief cut will help to fund a reduction in National Insurance Contributions for workers in their 20s and 30s.
It has also been suggested however that this ‘tax on age’ as it has been referred to in the media, should be postponed until at least after Brexit to provide more certainty for those saving for retirement or even until after the next election as it is potentially a politically unpopular move. The Government have also seemed unwilling to make changes here historically, therefore it’s a case of watch this space.
Other options available would be a further reduction in the pensions annual allowance from £40,000 to £30,000
A shake-up of student loans is expected and in addition, universities may be forced to change their charges depending on a course’s employment rate.
At the Conservative Party Conference, the Prime Minister had already pledged to freeze tuition fees at £9,250 and to increase the repayment threshold from £21,000 to £25,000.
After changes to pension allowances and the buy-to-let mortgage interest relief, it is thought that the Enterprise Investment Scheme (EIS) and perhaps even Investors Relief, which was only recently introduced, may be the next target.
Worth 30% tax relief for investments in high-risk companies, in addition to the Capital Gains Tax exemption on disposal of the shares after a set period, the EIS has been a useful source of finance for start-up companies.
But it is also seen as a way for the wealthy to avoid paying up to £300,000 of tax and the EIS has had around £15.9 billion worth of investments since its inception in 1994.
The thinking is that the relief could be cut from 30% to 20% and that the period that EIS shares have to be held could increase. This review is looking even more likely as the newer Seed Enterprise Investment Scheme (SEIS), has been reviewed this year too.
Investors relief allows those investing in certain qualifying trading companies, to pay 10% capital gains tax on any gain they ultimately make on realising their investment. This 10% rate of tax was previously only available to those who were employed by the company in question. It is understood that this and the related Entrepreneurs Relief are set to cost three times more than expected and are considered to potentially being subject to abuse.