With spring on the horizon, investors, policymakers, and individuals alike are turning their attention to the eagerly anticipated spring budget announcements, set to be released on Wednesday 6 March 2024, at 12:30pm. The Chancellor is keeping his cards close to his chest, and economists are suggesting that it would be difficult for him to fund any tax cuts but with an election approaching, we are expecting the Chancellor to announce something to try and sway the electorate.
What do we predict?
We would be surprised if there are many major announcements that will impact companies. The current economic climate would indicate that any giveaways will be restricted, and following a recent change to the corporation tax rate to 25%, from 1 April 2023, we do not expect to see any announcements in respect of the headline rate of corporation tax.
Full expensing, introduced in April 2023 to encourage investment by businesses, could be extended to include more qualifying expenditure. Leasing is one area that doesn’t qualify for full expensing, so a change to this may encourage businesses to invest more.
Income tax and National Insurance
With the election later this year, we can expect a few giveaways to be announced in the budget. Income tax rates would be the obvious tax to cut, as this would impact the larger percentage of the electorate, although a cut to National Insurance would be equally as headline-grabbing but would impact fewer individuals.
A potential tax cut could come in the form of increasing personal allowances, it is widely noted that due to the recent inflation increases, personal allowances has not increased at the same rate. If there is no change, it could result in those who receive their state pension no longer having sufficient personal allowance to fully cover this income.
High child benefit charge
Currently, the income threshold of £50,000, is applied to one person within a household. There is widespread talk of the unfairness that a couple earning £50,000 each, i.e. household income of £100,000, will not pay back a penny of child benefit. However, a single parent who earns £51,000 will have part of their child benefit clawed back. If there is one member of a couple who earns at least £60,000 and their partner/spouse does not have any income, the full benefit will be clawed back.
The budget may see the threshold raised and/or applied to household income, rather than a singular income.
Benefits in kind and expenses
Following the announcement that the treatment of most benefits in kinds will be moved from being reported on forms P11D, to being payrolled, it is anticipated that the government will share the proposals following the consultations.
Inheritance tax (‘IHT’)
There are many rumours around the potential abolishment of IHT. However, it may just undergo an overhaul. Perhaps the nil rate band, which has been £325,000 since April 2009 and has been frozen until at least April 2028, will be increased or the rate of taxed be amended. However, it may be that the government will favour any tax cuts more towards income tax given the current economic climate.
What are your predictions for the upcoming spring budget?
Share your thoughts and join the discussion as we navigate the twists and turns of the financial forecast together.
The next step
If you would like to know more, get in touch with Nick Donohue on n.donohue@uhy-manchester.com or Fiona Wheeler at f.wheeler@uhy-manchester.com.
