Like many in the financial world, we are preparing for first full autumn budget. This week, we are looking at three more predictions that could well affect Stockport business owners.
What’s happened to the Autumn Statement?
Firstly, you might recall that this time last year we had an Autumn Statement rather than an Autumn Budget. Things have changed this year because the government has decided to move to one major fiscal event in each year, rather than the two significant ones we have had for as long as most people can remember.
The result is that we are switching to an important ‘Budget’ each Autumn and a more diluted Spring Statement, which will be on a far smaller scale than previous Statements.
The Chancellor, Philip Hammond, announced the change in November last year, when he said: “No other major economy makes hundreds of tax changes twice a year, and neither should we.”
The idea is that this new timetable will allow tax changes to be put under much more Parliamentary scrutiny before they are implemented. We await to see if this is the case.
What to look out for this Autumn
Hammond will be boosted by figures released last week that show the budget deficit is the smallest it’s been for a decade. As we’ve already had a Spring Budget this year, it’s unlikely that there will be too many major changes. But here are three interesting rumours about what the Chancellor has planned.
1. Scrapping Stamp Duty for First Time Buyers
The Evening Standard reported recently that the Chancellor could scrap Stamp Duty for first-time buyers as part of his plan to win back younger voters and promote ‘intergenerational fairness’. The Chancellor is also set to give a £10 billion boost to the Help to Buy scheme.
Time will tell whether that proves successful.
2. Pension Raids
More rumours are abounding that the Chancellor is plotting a raid on older workers to fund tax breaks for younger people. The Telegraph recently reported that Hammond wants to “re stack the deck for the next generation”.
Many are suggesting that this could be a “tax on age” and that the plan could see pension tax relief cut for older workers to fund a reduction in National Insurance Contributions for workers in their 20s and 30s. The commentators generally think that this particular measure is almost a certainty, as the government looks to raise revenue in a slowing economy. This attack on people’s retirement nest eggs is possibly thought of as some easy to plunder, low-hanging fruit, but savers and investors need to be aware of this outcome as a definite possibility.
3. Cutting Tax Relief on Investments
Following major changes to pension allowances and buy-to-let mortgage interest relief, it seems from some of the financial press that Enterprise Investment Scheme (EIS) could be hit next. These provides tax relief worth 30% for investments in high-risk companies, alongside Capital Gains Tax exemption on disposal of shares after a set period.
For many startup companies, the Enterprise Investment Scheme has been a useful source of finance, since its introduction in 1994. In that time there have been some £15.9 billion of investments in around 26,000 companies.
However, there have been calls from many that the EIS is simply a way for the wealthy to avoid paying up to £300,000 of tax. The scheme, along with its younger sister Seed Enterprise Investment Scheme (SEIS), has been put under review this year, so it’s possible the November Budget could set out changes.
Predictions vary, but this could mean cutting the relief from 30% to 20% and increasing the period EIS shares have to be held.