Breathing space
Chancellor John Healey stated in his first Budget that it was his intention to give Britain some breathing space on the cost of living and the cost of business, while maintaining financial discipline and complying with his fiscal rules. The good news comes largely in the form of help with fuel and energy for households and business rates relief for small businesses. He imposed a tax surcharge on banks to help fund these measures, recalling the bank bailout by government two decades ago and arguing it was time for the banks to return the favour.
When he sat down, the Red Book appeared on the internet, setting out the full list of the measures he has proposed, and the table of expected outcomes from each. Very few items stand out as being particularly significant, but there are a great number of them. Some come into effect immediately; others are spread over the next five years. We are also about to be affected by big changes announced in previous Budgets, not mentioned again if they will proceed as planned. With such an amount of detailed tinkering, it is hard to keep track of what is changing when, and what it all means.
One thing is certain: Mr Healey has not made the tax system any simpler. The computation of personal income tax liabilities for someone with several different sources of income is now almost impossible to carry out without training and a computer. Checking that HMRC has assessed the right amount is not as easy as it should be.
In this document we have summarised the main tax proposals and their impact, and also included reminders of some matters announced in previous Budgets but only now coming into force. If you would like to discuss what it all means for you, we will be happy to help.
Significant points
- Personal tax allowances, thresholds and main rates continue to be frozen
- Pensions Tax Allowance to prevent those with income limited to State pension having to pay income tax on it
- Increases in income tax rates on rental and savings income from April 2027 by four percentage points instead of two as announced last year
- Investment limit for cash ISAs from April 2027 will not be implemented – limit remains £20,000
- New ‘Founders’ relief’ for CGT to apply from April 2027 – 10% tax rate on eligible gains up to £10 million
- Changes to rates of first-year allowances (January 2027) and writing down allowances (April 2027)
- Business rates relief threshold raised to £18,000 from April 2027