With a focus on alcohol duty cuts and a lower rate of Air Passenger Duty from April 2023, which are included in the budget, you might think the Conservative government are planning more parties and more holidays under the guise of reducing the damage to these sectors following the COVID 19 pandemic.
Perhaps you’d be right, although some of their policies do seem to the hit the mark. However, when they give, they also take away.
What they’re giving:
- The planned rise in fuel duty has been cancelled, likely due to rising oil prices causing soaring costs at fuel pumps.
- A rise in the National Living Wage from £8.91 per hour to £9.50, will come into effect from 1 April next year, a 6.6% increase.
- Pay freeze lifted for millions of public sector workers.
- Universal Credit taper rate will be cut by 8% no later than 1 December, bringing it down from 63% to 55%, meaning those claiming the benefit will take home some more money each month.
- New 50% business rates discount will apply in the retail, hospitality, and leisure sectors, up to a maximum of £110,000
- Schools to get an extra £4.7bn by 2024-25
- £300m will be spent on a “Start for Life” parenting programmes, with an additional £170m by 2024-25 promised for childcare
- The CGT property payment window is to be extended from 30 to 60 days for UK residential property.
- Arrangements to be introduced from 2025/2026 to make top-up payments into pensions for low earners who are in schemes that use the net pay arrangement.
- Consultation to be launched on further changes to the charge cap for defined contribution, auto-enrolment pension schemes.
What they’re taking away:
- Introducing a new 4% levy on property developers with profits over £25m rate to help create a £5bn fund to remove unsafe cladding
- Suspension of the State Pension ‘triple lock’ in 2022/2023. State Pensions to be uprated by the higher of CPI or 2.5%.
- Confirmation of increase to Corporation tax to rise to 25% in April 2023 on profits over £250,000.
Herbert Scott says:
There have been no shocks in this budget, although the government’s major tax change designed to tackle the NHS backlog and social care had already been announced: a 1.25 percentage point rise in National Insurance and dividend tax rates from April 2022, paid by both employers and workers.
The main take up from a financial planning point of view is that the Office for Budget Responsibility predicts that inflation will rise to an average of 4% over the next year – further bad news for anyone still holding large sums in cash – and that annual growth is set to rebound by 6.5% this year, followed by 6% in 2022.
Do you want to know more?
For those who want the full details, please click here to see the government’s summary.
If you wish to discuss any of the budget changes that are mentioned in this article or are wondering how to introduce some inflation protection into your financial plan, please feel free to contact us here.