This Content Was Last Updated on March 7, 2023 by Jessica Garbett
Please note this content was written contemporaneously, and may well now be superseded
A very quick set of “first impressions” on todays budget speech, as always focused on a typical Whitefield client – so I’m not paying a lot of attention to the wider proposals on public expenditure, excise duty on tobacco/alcohol, and taxes like Air Passenger Duty.
- VAT threshold – rumours had been flying around about lowering the VAT threshold, promoted by a report from the Office of Tax Simplification. At £85,000 the threshold is one of the highest in the EU (the EU we are shortly leaving), and its suggested this creates a “distortion” which could be eliminated by reducing the threshold. The alternative view is that reducing the VAT threshold would be a crippling blow to consumer facing small businesses who wouldn’t be able to pass on the costs. The Government is freezing the £85k registration threshold until March 2020 pending consultation.
- VAT anti avoidance – joint and several liability to electronic market places for their traders vat – this means Ebay/Amazon pick up VAT due, but not paid, by business sellers. This squeezes the onshore black economy and offshore low cost manufacturing markets. Its probably a good step for levelling the playing field for legitimate UK businesses.
- IR35 – rumours were also abounding of the reverse status decision process from the Public Sector, introduced April 2017, being applied to the private sector. In the event what we got was “The government will carefully consult on how to tackle non-compliance in the private sector, drawing on the experience of the public sector reforms” – credit to HM Treasury, they have realised they could do a lot of damage by acting precipitously here. No time scales given.
- Nothing else around IR35 / specific rules for PSCs – some restatement of principles for tackling abuse such as Contractor Loans and EBTs – for the most part an historic issue now (and I am thankfully Whitefield never touched these)
- Promise of a consultation on the Taylor review of employment practices in the modern economy – the issue of employment status. No actual changes.
- Some consultations and proposals on taxing digital businesses – for which read Amazon/Ebay/Uber/Apple – making sure they pay their “fair” share in the UK. Good intentions, but you can’t help but feel that these companies will always be one step ahead.
- Stamp Duty Relief for first time buyers of houses below £500k – may give a useful pick up to the property market.
- Corporation Tax indexation relief on chargeable gains frozen – don’t think this will effect many people. It was frozen for individual tax payers years ago.
- Landlords given the choice of using actual costs or a mileage rate when deducting motoring costs. This is a surprise, as I expect most of us thought this existed anyway!
What was missing:
- Changes to Entrepreneurs Relief had been rumoured- nothing appeared
- Changes to tax relief on pensions contributions had been rumoured – nothing appeared
- Apart from the promised consultation nothing of note on IR35/PSCs
Tax rates etc:
- Most allowances indexed
- Most tax and NI rates unchanged. VAT rate unchanged.
- The proposed 1% increase in Class 4 NI which was an embarrassing volte face turnaround after the Spring budget is not reintroduced. Sensibly its been rolled into the wider process of abolishing class 2 NI from April 2019 and protecting low earners
- Reduction of the Dividend Tax threshold from April 2018 from £5,000 to £2,500 is still coming. A cost of around £200 for a Basic Rate taxpayer.
Looking in the overview, the looser in this budget are big overseas businesses – Amazon, Ebay, etc – who will doubtless pass costs onto their users, both retail and sellers. The remainder feels like tinkering around the edges a bit, which with an electorally weak Government and the overhang of Brexit was to be expected.
Doubtless other gems will come up from the budget, but first glance suggests its not a major tax reform budget good or bad. As always these are preliminary thoughts a few hours after the speech, so are E&OE.