This year with the long run into the Budget, there was so much noise, leakage and discussions about what it was going to contain, it is a case of seeing what really got announced! In simple terms not a lot of what was being banded around!
The position was so bad this year, that the Speaker of the House told the Chancellor off, giving examples including the speech a couple of weeks ago, after which it was all thought that Income Tax rates generally were going to increase.
It got worse, an hour before standing up to deliver the speech, The Office of Budget Responsibility (“OBR”) put their report up on their website, which amongst its detail setting out costs etc., includes what the Chancellor has announced. This went round the press very quickly, and despite it being taken down within an hour, it was sufficient to distract from the speech, as the press reported what was in the report. This along with the level of noise, and distraction in the House of Commons while the speech is being delivered, jibes made to the other parties while delivering the speech makes the process a bit of joke. Time for change?
Many have reported that the long run in to the Budget, and level of noise stagnated the Country, which potentially could have been avoided earlier, as in the end based on the OBR growth figures which were released at the start of November, the black hole to be filled was £26bn, not the £35bn to £40bn being banded around. There were also significant number of spending announcements, including the very last announcement, the abolishment of the two-child benefit cap.
The OBR growth forecasts have been revised but not as bad as they thought:
- 2025: 1.5%, up from 1% in March’s Spring Statement (this is where the improved position came from)
- 2026: 1.4%, down from 1.9%
- 2027: 1.5%, down from 1.8%
- 2028: 1.5%, down from 1.7%
- 2029: 1.5%, down from 1.8%
- 2030: 1.5%, a new forecast
However, the above shows stagnant growth over the next five years, and at the pre-Budget CBI conference, the Business Secretary, Peter Kyle admitted "I accept that we need more urgency, we need boldness, because we inherited a growth emergency.” As well as accepting that the wealth which impacts investment is leaving the UK.
The Chancellor, therefore, after getting the growth and other figures out of the way, went on to say how the UK was the place to do business, giving examples of success, and announcing measures to aid growth with extensions to the EMI share inventive scheme, and the tax efficient capital investment schemes, amongst others. One of the supporting documents to the Budget, is called Entrepreneurship in the UK, setting out the announcements, and other measures to support growth. There is also a consultation announced to look at tax support for entrepreneurs and scale up businesses, and should they be improved? Did this Government not increase the Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) from 10% to 14%, going to 18% in April 2026? – was this not an incentive tax measure?
Tax increases took place as expected, the biggest ones being more stealth taxes i.e. not increasing personal allowances, and thresholds until 2031 (previously frozen to 2028), so that more individuals dragged in to paying tax, or higher rates, estimated to impact 800,000 taxpayers, and raise £8bn. The other being the well pre-announced pension salary sacrifice, where a cap is to be introduced of £2k, and anything above will incur NIC costs. The NIC charge on LLP profit shares, taxing gifts, or changing the 7-year potential exempt gift rules, and getting rid of the 25% tax free pension lump sum – nowhere.
At the end of the speech the Chancellor said that she has not increased income tax rates, not quite true, as property, interest and dividend income tax rates all increased by 2%.
It was expected that there would be softening of the changes to agricultural property relief, and business property relief for inheritance tax which was reduced from unlimited to a £1m lifetime allowance in the last Budget. A soften was announced, in that the £1 million relief could now be transferred between spouses and civil partners, if not utilised by the deceased. No increase in the amount.
A summary of the detail of what has been announced can be found in our BLOG SUMMARY!
However, there are number of areas where we expect more detail, with a list at the end of our main article, as the Treasury have not released all the tax information impact notes which usually follow immediately after the Budget speech. (Is this another example of late preparation?). These include details on changing the nil taxation of sales to employee ownership trust and capital gains tax for non-UK tax residents.
We are aware a lot of our clients want to know how the increase in dividend income tax rates impacts their remuneration strategy, and we will be looking at this over the next few weeks, and report back.
If you need to discuss any other matter arising in the Budget, please do not hesitate to contact us.
