Chancellor Phillip Hammond is expected to make several public spending announcements to appease Brexit backbenchers in this year’s Autumn Budget. Key topics are expected to include additional funding for the NHS and Theresa May’s mission to end austerity.
With Brexit looming it is unlikely that the Government will have much wiggle room in the Autumn Budget to release a much-needed boost to these areas, so the key question is, where will the funding come from?
Theresa May has already promised to inject another £20bn into the NHS by 2023, however, there was no indication of where the funding would be sourced from until Hammond’s recent comment at the Conservative Party Conference, “If we want a well-funded NHS fit for the future we will have to find a little more tax to fund it in the future. I shall say more at the time of the Budget.”
It is still unclear whether Hammond intends to target pension tax or tax on digital firms, commonly referred to as ‘Amazon tax.’
Scrapping pension tax relief and reducing the annual allowance, would be a bold move to save funds. However, it is likely that Hammond will tread more cautiously, making small tweaks to make the system less generous. With so many still arguing that high-earners benefit from pension tax relief the most, it would not be surprising to see tax relief for pension contributions limited to the basic rate of income tax.
At the Conservative Party Conference, the Chancellor did confirm that there would be a new tax introduced for digital firms. Hammond needs to be careful that the tax imposed is not too harsh though as it could negatively impact entrepreneurs and bricks and mortar businesses that also trade online in addition to stifling Britain’s competitive edge in the UK and internationally. The tax on online sales would, however, help to level the playing field between bricks and mortar stores and digital businesses.
The shortage of housing across Britain will certainly be addressed. It is unlikely that any major changes will be made during this Autumn Budget, even with many investors hoping and praying that the additional 3% Stamp Duty on second homes will be removed.
There is likely to be additional funds promised to smaller builders to help to boost the number of new homes being developed.
Theresa May did make a comment in recent weeks that she would be imposing a new tax on foreign property investors to tackle homelessness. The tax will be charged through additional stamp duty on new purchases, however, we don’t expect this to be formally announced in this year’s Autumn Budget.