For this month’s finance sector article, we asked our Director what he thought about Brexit and its effects on the finance sector. As you can imagine, there was plenty to cover. However, since the ‘Brexit Budget’ is due to be delivered this month, Dan has highlighted some key areas to look for:
‘Things to look for and expect in the budget speech! IR35 in the private sector is a major headache for recruiters.
“Chancellor Philip Hammond is set to give his Budget speech on 29 October 2018, earlier than the usual date to avoid any clash with the final stage of Brexit negotiations.
Of course, Brexit is among the main pressures overshadowing Budget 2018, but with no clear outcome to the negotiations yet, the implications for the UK economy are still uncertain.
Many will also be watching for signs that “the end is in sight” for austerity, as Prime Minister Theresa May recently claimed at the Conservative Party conference.
Another key area of focus is how the Government will fulfill its pledge to provide an extra £20 billion of annual funding to the NHS by 2023.
This makes it unlikely there will be any major tax cuts and could instead mean higher taxes or reduced reliefs. Here are five changes that could come out of Budget 2018:
Pensions tax relief
One of the most likely targets to raise extra money could be tax relief on pension contributions, which the Chancellor has called “eye-wateringly expensive”.
According to predictions from Royal London, the annual allowance could be cut from £40,000 to either £35,000 or £30,000.
Steve Webb, director of policy at Royal London, said:
“Time and again, pension tax relief has been the go-to source of money for cash-strapped Chancellors.
“We fear that the amount people can contribute into their pensions each year will be cut yet again, sending out the wrong message at a time when we need people to be saving more, not less.”
IR35 for the private sector
Following reforms in the public sector in 2017, the Government may extend ‘off-payroll’ rules to IR35 in the private sector.
A consultation on the topic, which ran from May to August 2018, was met with negative reactions from industry groups – but it remains to be seen how HMRC will handle the issue.
Andy Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self-Employed (IPSE), said:
“We make one over-riding recommendation: don’t do it.
“This is a measure that will heap more administrative burden onto UK businesses, further cripple productivity and further complicate employment status law.”
The BBC speculates that the personal income tax allowances could be frozen, potentially raising up to £2 billion a year.
This would go against a Conservative manifesto pledge made in 2017 to raise it to £12,500 for basic-rate taxpayers and £50,000 for higher-rate taxpayers by 2020.
The threshold at which businesses are required to register for VAT is currently frozen at £85,000 until 2020.
However, future changes could be announced in Budget 2018, to address concerns that businesses are deliberately limiting their growth, so they remain under the threshold.
This might mean a change to the threshold, or a “smoothing mechanism” to introduce the tax more slowly.
The Office for Tax Simplification is due to publish a detailed report on inheritance tax this autumn, which could influence the Chancellor’s decisions if it arrives before Budget 2018.
This might include simplifying the system of gift exemptions, which has remained mostly unchanged since 1986.
Sean McCann, financial planner at NFU Mutual, said:
“A sensible approach would be to replace all the existing exemptions with one single annual exemption of at least £10,000 which would increase in line with inflation.
“Rather than a radical overhaul of inheritance tax in the Budget, we’re likely to see some simple changes to help people pass on more of their wealth without the fear of triggering a tax charge.”‘