A Budget surprise?

The Budget is on 29 October 2018, so what can we expect? The lack of clarity on Brexit and the mixed messages coming from the Chancellor and Theresa May recently make forecasting very hard.

The contradiction in Government is that the Chancellor has been saying that taxes will need to rise, because of the NHS spending commitment, amongst others, whilst in her “Dancing Queen” speech last month, Mrs May declared that “austerity was ending”! I know it was qualified with “if we get a good Brexit deal”, but that qualification was lost in the headlines.

At this point in time, I suspect that the Budget will be broadly neutral, but with more tweaks and complications. I’d expect to hear something about electric cars and increases in tax on petrol and diesel company cars, and the self-employed operating as personal service companies. The gig economy may also get some attention.

I would also expect the planned drops in Corporation Tax to remain, and possibly accelerated to attract businesses after Brexit.

The Chancellor may also look again at dividend taxation and a rise in the basic rate of 7.5% could be a relatively soft target for raising tax. The perennial risk of reducing high rate tax relief on pension contributions is also possible.

In terms of Making Tax Digital, which is starting with VAT in April 2019, I would expect (and hope) for more clarity on the next phases, affecting both businesses and private individuals.

The main overriding issue, however, is of course Brexit and I expect that the Chancellor will have to leave significant wriggle room to cover all eventualities, or probably have another Budget should a deal not be done.