Emergency Budget: Shackles 'on', but Tory tinkering already set

IT SEEMS SOMEWHAT INCONGRUOUS to hold a Budget in the summer, but election years tend to cause all sorts of quirks to the usual, settled timetable.

So here we are, and no-one can seem to decide whether this Emergency Budget – with not a hint of hyperbole – will herald a slew of drastic changes ushered in now that the Liberal Democrats are no longer playing the role of political handbrake, or whether it will be more low-key, with those changes brought in more gradually.

With that in mind, it is perhaps best to focus first on the things that are most likely to happen, before moving on to loftier, more speculative predictions.

Chief among them is the well-trailed ‘triple-lock’ on taxes, which we know will be introduced, but it will be interesting to see how it is worded, BDO tax partner David Brookes tells Accountancy Age. Presumably, he says, the rates and some thresholds will be locked for income tax, NIC and VAT but we should expect a certain amount of wriggle room for the government to effectively raise taxes by reducing, removing or capping some tax reliefs or by broadening their base.

Tax avoiders and evaders

Then, as with almost every previous Budget and Autumn Statement since 2010, there are very likely to be moves made against tax avoiders and evaders, through which the government expects to recoup an extra £5bn. It seems fair to anticipate further announcements about criminal sanctions – particularly whether there’s been any rethink on the proposed strict liability offence for offshore evasion and the lack of immunity from prosecution under any future general disclosure facility, Baker Tilly tax partner Andrew Hubbard says.

Movement is expected, too, around capital gains tax in order to offset the effects of the ‘triple lock’, with potential for rates to hit 20% and 40% in line with the current income tax bands.

Inheritance tax could attract some tinkering, after the Conservatives promised a new £175,000 per person transferrable allowance for married couples and civil partners when their main residence is passed down to their children on death. This would mean that, in addition to the existing £325,000 per person nil rate band each person has on death, parents would be able to pass on their home, worth up to £1m, free of inheritance tax.

Encouraging business

Business, of course, has been a key plank of the Conservatives’ offering, and as such more moves to encourage commerce are in the offing.

In particular, ‘productivity’, for some reason, is the buzzword of the moment and to that end measures including a consultation on a new ‘productivity allowance’ for capital investment could be brought in. Some cutting of red tape for small businesses including new funding and tasks for the Office of Tax Simplification (OTS) to deal with are also expected.

Then there are thought to be taxes on our collective bad habits – or ‘sin’ taxes for those of a religious disposition – which the government sees as fair game for more revenue. Ergo, expect levies on excessive alcohol, salt and sugar consumption.

That said, the ‘pasty tax’ went well, didn’t it?

You can keep up to date with the various comings and goings on Budget Day next week here on Accountancy Age.