Taxing times for the chancellor

Chancellor Rishi Sunak has a delicate balancing act to perform when he stands up to give his Autumn Budget speech on October 27.

While trying to aid the economy’s post-pandemic recovery he must grapple with the deficit and the highest figure of government borrowing since the end of the Second World War.

Then there is the growing spectre of inflation and its impact along with soaring energy prices.

On top of all that is the pressure to support the government’s green agenda, with the COP26 meeting in Glasgow in November and recent announcements by the Prime Minister.

The government is also committed to its “high wage, high skill, high productivity” mantra.

And with calls for more action on the national minimum wage, which increased in the March Budget, we may see another rise for workers aged 23 and over.

There have been reports it could increase by as much as five per cent from its current £8.91 an hour rate.

When it comes to the green agenda and the drive towards net zero, options open to the chancellor include increasing tax incentives for businesses to support their move to zero emission vehicle fleets and measures to make green capital investments more attractive.

Despite the chancellor’s publicly stated desire to cut taxes it is very unlikely that we will see that happen in this Budget. At the same time an increase in income tax or movement or national insurance is not seen to be on the agenda.

Business is still assessing the impact of the September announcement that National insurance contributions and dividend tax rates will increase by 1.25 per cent from April 2022, with the projected £12bn annual income ringfenced to pay for health and social care.

That followed the chancellor’s March announcement of an increase in Corporation Tax from 2023, with a new rate of 25 per cent. It came with plans to create a ‘Small Profits Rate’, for companies with profits of less than £50,000, which will be kept at the current 19 per cent level.

There is speculation that Capital Gains Tax could rise on October 27, with rates aligned more with income tax rates.

However, Inheritance Tax rates are set to remain unchanged and with the soaring cost of fuel and recent shortages at the pumps, a fuel duty increase is also seen as unlikely.

Any increase on alcohol duty would have a detrimental impact on the hospitality industry, one of the worst impacted by the pandemic, as it looks towards its recovery.

There have been reports of a possible simplification of the alcohol tax system which could lead to a cut in the price of beer and wine, something that would be widely welcomed in the industry.

Businesses would like to see some movement on Business Rates, which are having a dramatic impact on the high street, with retailers in particular calling for action. It may be the chancellor feels he has to make some move, especially to aid smaller ventures. The same goes for support for business growth.

The Federation of Small Businesses is calling for more focus on helping employers create new jobs and deliver skills. It wants to see more being done to tackle employment costs, including increasing the Employment Allowance.