Looking ahead to Budget 2018

Next week will see Philip Hammond deliver the speech in which he’ll announce the government’s spending and taxation plans for the next tax year starting in April 2019. This year’s Budget is different for several reasons. It’s earlier than normal because of the need for clarity before the final stages of Brexit negotiation in November and it’s happening on a Monday rather than the usual Wednesday, which would coincide with Halloween. This would have been a dream for the newspaper headline-writers – although the government deny this had anything to do with the change of day. As a result of it being on a Monday, it’s starting 3 hours later than normal at 3.30pm (parliamentary business begins later on a Monday to allow MPs time to travel to London from their constituencies).

What can we expect?
Fuel duty will remain frozen for the ninth year in a row, but with the Chancellor himself suggesting the freeze would be scrapped its days could certainly be numbered. A crack down on large multinationals paying relatively low levels of tax is expected, with the likes of technology giants like Amazon and Google in the government’s sights. While action on this matter will be welcomed by most, business groups oppose a new tax, preferring an international tax agreement to tackle the issue.  Income tax thresholds are expected to increase in line with the party’s manifesto pledge to raise the personal allowance from £11,850 to £12,500 and the higher-rate threshold from £46,351 to £50,000 by 2020. There is speculation that pension tax-relief for higher earners could be cut by means of an overall cap and/or by the rate at which relief is tapered for the highest earners.

And what’s not yet clear?
This will be the final Budget as part of the European Union. So the state of the economy and our preparedness for leaving will no doubt be a significant part of the speech and will be watched closely at home and on the continent. And while it’s likely to be thought of as a critical announcement, the reality is that the outcome of Brexit negotiations is likely to have a greater impact on the nation’s finances. There’s uncertainty over what increases might be announced in alcohol and tobacco duty and we’ll have to wait and see whether next week’s announcements will signal the end of austerity as Mrs May alluded to at the Conservative Party Conference earlier this month.

Sources:
Budget 2018: What can we expect from chancellor Philip Hammond’s budget this month? Caitlin Morrison & Ben Chapman, The Independent online, 19 October 2018

Budget 2018: Everything you need to know, Kevin Peachey, BBC News website, 22 October 2018

 

 

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