Few people will have envied the new Chancellor’s task in setting today’s Budget.
The stated aim was to support ‘working people’. To an extent, the plans outlined do that. Promises not to raise the rates of income tax, self-employed or employee national insurance and VAT have been kept. However the tax-free personal allowance remains frozen until April 2028, which does raise the effective rate of tax paid by individuals over time, even though the tax rates themselves are staying put. (Hitting lower-income taxpayers proportionately harder than those on the highest incomes.) And new national insurance and minimum-wage rates paid by employers will indirectly affect individual workers to an extent, as employers may need to tighten their belts, possibly taking on fewer employees in response. There will also be impacts on consumers, if employer businesses increase prices of their products.
A few ‘crowd pleasers’ for devotees of draught beer, and drivers with gas-guzzler cars. And a slight weighting of certain taxes towards multiple property owners and users of private jets.
Some of the £40bn extra revenue to be raised, which is needed for the very considerable spending outlined, will come from capital taxes. Capital gains tax rates rise, and some inheritance tax reliefs will freeze or decrease in future. And there will be a withdrawal of tax reliefs currently available to non-domiciled UK taxpayers. Capital taxes and those paid by people who are internationally mobile offer more opportunities for (legitimate) tax planning than some other taxes: for example, people may change their decisions about selling assets, rewrite their Wills, or replan a move to or from the UK.
So it will be interesting to see whether the amount raised provides fully for the much-needed big spend, including on health and infrastructure.