Autumn Statement 2016 Predictions
With the Autumn Statement looming and The Chancellor doing the weekend TV rounds, what can we expect this Wednesday. Views are split between an ‘empty Budget’ for tax purposes and more of “setting the stall out” regarding Government spending, to something very radical, with the Conservatives putting up the flag that they are backing business and economic growth. We don’t think there’s going to be any middle ground. Traditionally, the Autumn Statement has outlined economic projections and broad departmental spending allocations, while the Budget largely dealt with taxation plans. In recent years that distinction has become blurred and some taxation plans are now also announced in the Autumn Statement, but we don't learn fine details. Odds on favourite is that it will be an empty statement in respect of tax, with a couple of profile raising giveaways/targeted activities, but it is likely to be an intensely political Budget following Brexit. The Government had already broken its promises to reduce the county’s debt by 2020 and while Brexit has done far less immediate economic damage than the Treasury and others predicted, the tax receipts nevertheless aren't rolling in as quickly as hoped. At the last Budget, the economy was expected to grow at an increasingly rapid clip, drawing in tax revenues for the Exchequer to bring the deficit down. If the forecasts are right, tax revenues will be further impaired, forcing the Chancellor to borrow more to make up the shortfall between his income and what he's spending. Our view is that we are unlikely to see any tax increases on Wednesday but may be some further targetedactivity in areas where the Treasury see tax avoidance.
Possible Tax Measures
Confirmation of the previous Chancellor’s Personal Allowance increase announcements and raising the national insurance threshold in line with the Personal Allowance. This measure would help those families who are defined as just managing and now being named JAMS.
Raise the 40p income tax threshold from £43,000 to £50,000, or somewhere in between.
Tougher measures or more targeted activity in the area of disguised employment, where workers are in effect working full-time for an employer, but are regarded as “self-employed”, being engaged via their own personal service company. Measures are already due to be introduced in April 2017 to restrict the practice of using “self-employed” workers in the public sector, but at the time no mention was made of the private sector. However, we are seeing more HM Revenue Customs targeted activity in this area, with an increase in the number of IR35 enquires, including the announcement to look at 100 freelancers working at the BBC.
Salary sacrifice arrangements could be stopped or restricted, following a consultation over the summer. Salary sacrifice schemes are a common arrangement for both employer and employee. They work by the cost of an employee benefit being deducted from the gross salary, reducing the amount on which income tax and national insurance has to be paid. The employee will still have to pay tax (usually coded out and reported via Form P11D) – and the employer pays class 1A national insurance on the benefit’s value (unless it is a tax free benefit). The schemes are very common with tax free benefits such as childcare and pension contributions but also taxable benefits such as gym membership and company cars. Tax free benefits are likely to be protected, but measures for taxable benefits such as company cars are likely to be made ineffective by the imposition of employee NIC.
Although we have had numerous pension taxation changes in the last few years, with restrictions on the amount that can be contributed annually and the lifetime allowance, the pension industry has been lobbying to get these restrictions removed, so maybe a new Chancellor will take a new approach.
Making tax digital, the plan to make all tax reporting digitalised starting in 2018, which will result in the self-employed being required to make quarterly returns, is likely to be delayed. There is still a lot of work to be undertaken in respect of the digital plan and with other more pressing issues, such as Brexit, maybe making tax digital could be delayed for a few years!
We will wait to see what Wednesday brings from our new Chancellor!
We shall be sending out our usual Budget Bulletin covering the main measures following the Chancellor’s speech, which will also be available on our website.
Should you require any further details on the items contained in this guide or tax advice in general, please do not hesitate to contact Harbour Key Limited
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21 November 2016
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