Summarising today’s Budget, PwC NI Tax leader Janette Jones says we could be doing it again in the spring:
“Despite a Budget that covered a vast amount of ground with a net tax giveaway of just over £5bn the Chancellor has left the door wide open for another major fiscal event in the spring.
“If this was a Budget that sought to scatter a little fiscal confetti on long-suffering taxpayers, you could say that the Chancellor has gone a long way to meeting his objective. This was a Budget sprinkled with giveaways and mini-crowd pleasers.
“Despite pledging to haul our creaking tax system into the digital age, the announced digital service tax was little more than a nod in this direction. Ultimately, another new tax is merely a sticking plaster over the cracks of a system that needs a fundamental reform to keep pace with modern ways of working and doing business."
The Chancellor's giveaways came in the form of cheap, light and airy personal tax measures:
“Today’s personal tax measures were more tinkering than transformational, with the headline being his decision to continue to increase the personal allowance and basic rate band to 12,500 and 50,000 respectively in April 2019.
“With wage inflation of 2.7%, it should mean that those with average or better wage growth see the tax bands move with them. However, the lowest paid taxpayers who earn less than the current personal allowance won’t see any benefit.
“He’s retained the £20,000 saving limit for ISAs for the next 5 years and that’s welcome. But the unloved Lifetime ISA was not reformed and is likely to remain relatively unpopular with younger savers.”
Following the announcement that the Belfast Regions City deal has been approved, Janette said:
“That £350 million for a Belfast City Region Deal is good news, as is the commitment to ensure it can be spent in the absence of a Northern Ireland Executive. And the move towards negotiating a Derry/Londonderry and Strabane City Region Deal is also welcome.
“However, the pledge to invest £350m in shared and integrated education and shared housing is not a ‘new ‘announcement. It is part of the government’s £500m Fresh Start Agreement, announced back in November 2015, where spending is subject to stringent value-for-money considerations.”
The Chancellor has ignored calls to cut VAT on Northern Ireland tourism and Air Passenger Duty on the region’s short-haul flights. Janette said:
“The Chancellor has ruled-out cutting either VAT on tourism or an immediate end to short-haul APD for Northern Ireland. A pledge to establish a technical working group to consider the practical and legal challenges to changing short-haul APD, sounds like kicking that particular can down a road that is already long-travelled.”
Janette said Philip Hammond's decision to create a new digital services tax may have unintended consequences:
“This was widely trailed as a step towards levelling the playing field between online retailers and the high street. But the Chancellor has opted for a narrow 2% rate, an implementation date of 2020 and aimed it at the tech giants and not the online retailers.
“It will do little to address the woes of bricks and mortar retailers and could even be perceived as an anti-American measure and that could come back to bite us as the UK looks to move to trade talks after the Brexit deadline.”
Looking at the small print of today’s Budget makes an immediate and significant change to Entrepreneur's relief which will impact smaller employee shareholders.
“The relief which is worth up to £1m on the sale of qualifying shares will be narrowly targeted at employees who have at least a 5% stake in their company's profits and net assets - those who own less will get no relief.
“This makes the relief more targeted on those with significant stakes in the business, but risks creating two tiers of employee shareholders – potentially and overall disincentive effect for the business as a whole.”