With the last Spring budget just a few days away, we take a look at expert predictions on changes that could affect business.
Tax is high on the list for this budget. With corporate tax rates already scheduled to fall to 17% by 2020, some experts think an increase in National Insurance may be on the cards.
Iain McCluskey, a partner in PwC’s People and Organisation practice, says: “Since 2010 government has had a good go at reforming tax for pensions, savings, loans, capital gains tax and inheritance tax but so far national insurance has remain largely untouched.”
Adam Chester, Head of Economics, Commerical Banking at Lloyds Bank, shares this view, noting: “Whatever the Chancellor gives with one hand, he is likely to take away with the other. In particular, a 3p in the pound increase in Class 4 National Insurance contributions for the self-employed has been mooted.”
Laurence Field, Corporate Tax Partner at Crowe Clark Whitehill comments: “Given that corporate tax only accounts for 8% of all tax raised and costs a considerable amount to collect and administer, a radical Chancellor could look to abolish it and tax distributions from the companies and perhaps increase employer’s National Insurance.”
Longer term, Brexit needs to be a major consideration in implementing changes that bolster the UK’s international competitiveness.
Michelle Quest, Head of Tax at KPMG in the UK, said: “KPMG‘s surveys of clients have established that companies look for simplicity, stability and predictability, both in economic and political terms when it comes to deciding where to do business. In light of this, a roadmap setting out guiding principles and priorities covering all taxes – personal and corporate – would be welcomed.
“This would also go some way to offering some stability as the UK heads into what may be many years of uncertainty exiting the EU.”
With higher than expected tax receipts, the Chancellor Phillip Hammond has more money available to invest in the economy. But with Brexit on the way and the deficit still running high, he’s playing it safe and holding onto the surplus, promising that this budget will not be a ‘show fest.’
Ian Stewart, chief economist at Deloitte, says: “Good growth and better-than-expected tax revenues provide Mr Hammond with some good news ahead of this Budget.
“But the long grind of public sector austerity has much further to run. After seven years of deficit reduction, annual borrowing still accounts for 3.5% of UK GDP.
“The squeeze on public spending is stepping up, this Budget is unlikely to see any let up on that, and by the end of this decade the tax burden is likely to be at a 30 year high.”
With the business rate rise coming into force in April after a delayed revaluation of property, business rates are expected to get a mention.
Yael Selfin, Chief Economist at KPMG in the UK, said: “The strong January public finances figures announced earlier could see government net borrowing for 2016-17 well below OBR’s forecasts in November.
“This gives the Chancellor a bit more room for manoeuvre in his final Spring Budget. If the UK economy remains stable over the transition period once Article 50 is triggered, Mr Hammond could meet his objective to reduce the budget deficit below 2 per cent of GDP by 2020-21, while offering a few small giveaways.
“These could include alleviating the burden on some small businesses impacted by rising business rates.”