Spoilers ahead of the delivery of today’s Budget by the new team at the heart of government included a commitment to abolish standing charges for household gas bills and remove tariffs from certain food items. All part of Andy Burnham’s plan to give households ‘breathing space’.
When he stood up to deliver his first Budget, Chancellor John Healey explained that it was built on the ‘fiscal discipline’ set by his predecessor and was for ‘the working people of Britain, for British businesses big and small’
Against a background of global events having a major impact on energy prices and the cost of living he repeated the Government’s commitment not to raise taxes on working people and not to slash public services.
The headline measures he outlined included:
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A direct contribution of £100 into the accounts of household energy users whose properties fell within the English Council Tax Bands A – D. He added that funds would be provided for similar purposes to the Scottish, Welsh and NI governments
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The VAT cut on domestic electricity bills already in force would be extended until July 2027 as would the existing 5p cut in Fuel Duty
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The National Minimum Wage would increase by 3.9% for all workers with the adult rate raised to £13.21 per hour from 1 April 2027
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A new Pension Tax Allowance would come into effect from April 2027 for those whose only taxable income was the State Pension. It will stop pensioners having to pay tax on the small amount of pension which exceeds the Personal Allowance.
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The proposed reduction in the limit for investment in a cash ISA has been abandoned
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A temporary 3% increase in the bank surcharge
Tax measures possibly to have a direct impact on umbrella employees and limited company contractors were:
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Mileage rates for drivers using their own cars for business clocking less than 10,000 miles a year would be made permanent at 55p per mile whilst the rate for mileage above 10,000 would increase from 25p to 35p
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Rates of income tax on property income and savings interest for 2027/8 will increase to 24% for basic rate taxpayers, to 44% for higher rate payers and 49% for additional rate payers. The Chancellor confirmed that there would be no increase in dividend tax or employment taxes
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Business Asset Disposal Relief would be reduced from £1m to £500,000 from April 2027. Limited company contractors need to be alert to this although the Chancellor claimed that only 3 out of 4 claimants would be affected by the reduction
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There will be reform of the Self Assessment personal tax system where payments on account are involved. This will be aimed at requiring smaller, more frequent payments through the year rather than the existing 31 January and 31 July dates of payment
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The existing requirement to make a Self-Assessment Tax Return where employment expenses claimed exceed £2,500 is to be scrapped
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The Trading Allowance, currently £1000 pa is to be increased to £3000 pa to encourage individuals to develop their own small business
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A reduction of 12% in capital allowance writing down allowance but an increase to 50% in first year allowance to encourage new investment
Chancellor Healey’s Budget contained an update on efforts to ensure that individuals and businesses paid the right amount of tax at the right time. It included a promise to recruit more HMRC compliance officers, further investment in technology and strengthened powers for HMRC to close the tax gap.
As is usual with Budgets the devil is in the detail. We’ll be working hard to identify other measures or proposals which may affect clients now or in the immediate future.
