By Esmée Hardwick-Slack
Chancellor Philip Hammond has confirmed that the 2018 Budget will take place Money 29 October. With Brexit negotiations looming, many believe there is more uncertainty than ever surrounding the state of the UK economy. In a post on Twitter, Hammond said he would set out a plan that would support public services and build a “stronger, more prosperous economy”.
The Prime Minister announced in her conference speech that the party will continue to freeze fuel duties for the ninth year in a row. It is estimated that the policy costs the Treasury around £9bn a year. Hammond has said the freeze had “come at a significant cost to the exchequer, but the high oil price and the near-record pump price of petrol and diesel are also imposing a significant burden on motorists”.
Many people will be wondering how the chancellor will fulfil the Prime Minister’s promise to pump an extra £20bn into the NHS by 2023. Theresa May has admitted that it will be funded through increased tax, but no more details have been revealed.
Rachael Griffin, tax and financial planning expert at Quilter explains: “The NHS is currently critically underfunded, which is why Phillip Hammond confirmed at party conference that there will be an increase in taxes to help supply the NHS with a £20 billion-a-year boost.
“One idea, which could make the upcoming tax increase more palatable, is to show the increase separately to someone’s main taxes to illustrate that it’s earmarked purely for healthcare. Some argue that if it is clear what the money is being raised for the public is generally more sympathetic to it.
“However, the Treasury may rail against this idea as by ring-fencing taxes it is generally harder for the government to change its spending priorities and siphon taxes to meet other priorities such as crime or transport.”
Philip Hammond revealed at the party conference his intentions to impose a new “digital service tax.” Tech companies such as Google and Facebook have come under fire in recent weeks for moving sales through other countries and paying a modest amount of UK tax. The new tax would measure the value these tech companies generate from UK users looking at adverts, then introduce a tax paid on that value.
The chancellor recently described the pension tax relief as “eye-wateringly expensive”, costing the government around £40bn per year, making it clear that there is a high chance of the tax relief allowance being cut. You receive pension tax allowance at the rate you pay on your income. If you save money into your pension, some of the money that you would have paid in tax on your earnings goes into your pension, rather than to the government.
At the Conservative party conference the Prime Minister announced that she would be scrapping a cap on what councils can borrow to build homes, in a bid to tackle the decline in home ownerships. In addition, the PM suggested there would be a 3% stamp duty surcharge for overseas home buyers. The plans were announced following concerns that foreign buyers have been taking advantage of Britain’s housing market as a safe haven for their money, pushing up prices in the process.
Some have suggested that more support could be offered to renters and tax breaks could be introduced for buy-to-let landlords. Housing is a priority for government, and the Chancellor may try to make life easier for those struggling with their housing situations. A tax break for landlords could make it easier for long-term tenants to buy their home as it may be at a cheaper price, and their landlord would be incentivised to sell it to them.
With business rates due to increase next year, the Chancellor has been under pressure to use the Budget to help save the high street by the retailers who are battling for survival amid the rise of online shopping. Many have noted that it is deeply unfair that companies such as Amazon and Asos pay very little in business rates due to their premises being out-of-town warehouses.
It has been reported that the Chancellor has been considering a £300 million lifeline for high street retailers who have been affected by the business rates reform. Should this go through, it would mean an immediate reduction in property taxes for the next two years and would form part of a wider £80 million reduction for businesses operating in areas of the UK where property values have decreased.
Chairman of the Federation of Small Businesses, Mike Cherry, has said: “The Chancellor must provide targeted support to those businesses struggling to keep their heads above water. It’s vital that businesses are given the right support in the form of a rates freeze from April 2019, when the next inflation-linked rise is due.”
As this is the final Budget in which the UK is part of the European Union, it’ll be interesting to see how the economy will be prepared for the UK’s exit. However, it is clear that any deal made with the EU, or the lack of, will have a bigger impact on the nation’s finance than anything the Chancellor says in the Budget.
The PM’s claim that “austerity is over” was one of the most prominent lines in her conference speech. Stating that Brits had been forced to tighten the purse-strings in the last ten years, since the financial crash, and that they deserve a break. Many of us are now looking to Philip Hammond and to see if the PM’s words will be translated into the Budget.
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