FCSA's Julia Kermode makes budget predictions
- Very real concern that there will be an announcement to end tax relief on travel & subsistence expenses for umbrella employees. Government perceive this to be worth £400m in potential tax revenue, however all the indications are that this would not be the case, and such a policy change could actually reduce tax revenue for the Exchequer. We have proposed alternatives that will target non-compliance, and outlined our arguments to HMRC as well as MPs, yet there is still a real danger that the budget will include this £400m income if they need something to balance the books. The counter-arguments can be ignored for now, as it is presenting a positive UK financial position and vote-winning headlines that will be Osborne’s top priority. The detail can be dealt with later by whomever succeeds in the election.
- Tax avoidance will almost certainly feature heavily in the budget with public opinion firmly in favour of clamping down on this, plus tightening up here will also generate much-needed revenue for the Exchequer. In particular, we anticipate more details of the “Google Tax” which was announced in the Autumn Statement, and how this will work to maximise the UK’s tax yield from multinational corporations.
- As we are in a general election year, it seems likely that the budget will include proposals that will make a real difference to the general public. For this reason it is widely expected that the income tax threshold will again be raised, moving it closer to £11,000. There has also been a suggestion that the 40% tax threshold might be raised, although I suspect this will be less of a priority for the Chancellor.
- There is increasing awareness of low paid workers, with public opinion against this perceived exploitation, so the budget may include measures to raise the earnings level at which National Insurance Contributions become due. This would lessen the NI burden for low income workers, and therefore increase their take-home pay.
- Some have suggested that inheritance tax might be the big tax giveaway, specifically an end to the 55% tax on unused pensions after someone dies. This could be an important vote winner with the ever increasing older population.
- Pensions minister Steve Webb talked a few weeks ago about the possibility of a government "matching" scheme - whereby pension contributions would be matched by the government in order to encourage people to save more. This would need to be paid for, potentially by reducing or ending tax relief on pensions for higher earners.
- Everyone knows that savers have been unable to receive a reasonable rate of interest in recent years, so this might be addressed in the budget. Something along the lines of popular pensioner bonds - but for other groups of people – might be a possibility.
- There should be some pro-business announcements in the budget. Last year the Chancellor increased the annual investment allowance, but it is due to drop back at the end of this year. It is possible that he will use the budget as an opportunity to extend it for longer, maybe indefinitely.
- The North Sea oil industry has been hit by the falling oil price, and Osborne has already indicated a wish to support the industry. He is likely to use the budget as an opportunity to do just that.