With the annual Budget rushed forward to 29 October 2018 to avoid it becoming entangled with ongoing Brexit negotiations, there is pressure on the Chancellor. He has little room to spare on his budgetary rule to get the fiscal deficit down to 2% of national income by 2020-21 and keep public debt falling, leaving him in an unenviable position.
The Chancellor also needs to weigh up reassuring the public that the financial markets and UK’s public finances are on solid footing, with the Prime Minister’s pledge to provide an additional £20.5 billion to our healthcare service by 2023-24. In that regard, we expect the budget to be NHS centric.
Some tax measures the Chancellor may consider:
- Imposing a digital services tax (DST) on sales, even if it means going at it alone without international support, which has long been considered a crucial part to a solution
- The main rate of corporation tax is set to fall from the current level of 19% to 17% in April 2020. There has been speculation that this might be paused, although it would be surprising if the Chancellor didn't stick to this long-standing promise
- The extension of the public sector IR35 rules to the private sector, such that end-client private companies will have responsibility to check whether IR35 applies and if so, operate PAYE and NIC accordingly
- Introducing a 3% stamp duty surcharge on overseas buyers who are not tax resident in the UK, and
- Reduced tax relief for pension contributions.
Whatever the Chancellor announces in the forthcoming budget, the elephant in the room is Brexit, and until there is a deal there likely is little point in the Chancellor making any major fiscal plans.
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