Budget 2017 – It’s a grey area

PKF Cooper Parry is supporting TheBusinessDesk.com West Midlands’ coverage of the Budget this Wednesday. Here, tax partner Philip Rogers (philipr@pkfcooperparry.com) makes his predictions of what to expect from Chancellor Philip Hammond.

It doesn’t look good – as Monty Python would have said. Other than Brexit negotiations not going well, Sterling remaining weak, inflation running at 3%, a recent interest rate rise, and the party’s apparent lack of popularity amongst young people, what good has Mr. Hammond done?

Philip Rogers, tax partner at PKF Cooper Parry

In this Autumn Budget, the Chancellor of the Exchequer is going to have to work very hard with what must feel like one hand behind his back. He needs to try to appeal to the important “younger” part of the electorate, and probably at the expense of older voters. So, what might he do?

Here are our predictions and the likelihood of them happening (with 10 being a dead cert):

Reduce Corporation tax – honour the proposed reduction in the headline rate of Corporation Tax down to 17% by 2020. It’s currently at 19%)
8/10

Reduce the lifetime rate for Entrepreneurs Relief – this is very uch seen to be a “fat cat” relief in the first place. But this reduction proposes to reduce the lifetime limit for Entrepreneurs Relief (the 10% tax rate) from £10m to say £5m
5/10

Reduce the tax-free limit on dividends – from £5,000 to £2,000
10/10

Further increase to the tax rates applicable to dividends – currently 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional tax rate taxpayers. Potentially a small further increase in the tax rate across the board, to try and make the dividend versus salary argument completely neutral, and avoid the NIC leakage that the Chancellor is concerned about
4/10

Limit the interest tax relief for buy-to-let investors – where investors purchase properties via companies, to bring them in to line with individual buy-to-let investors
4/10

Stamp Duty holiday for first-time buyers – limited savings in real terms, but would be as much to take the wind out of the sails of the challenge from the Labour party
7/10

Raise the personal allowance – from £11,500 to £12,000 to help the low-earning younger employee, as well as pensioners
6/10

Cut or remove the higher rate tax relief on pension contributions – or, reduce the amount you can save each year from the current £40,000 limit
5/10

Reduce the lifetime pension limit – to less than £1m
4/10

Reduce the tax benefits associated with Venture Capital Trusts – to refocus the investments on to riskier start-ups as originally intended
7/10

Overall, it’s going to be a difficult balancing act and the Chancellor doesn’t have much to play with. With Christmas around the corner, he must somehow come across as Father Christmas, rather than Ebenezer Scrooge!