UK: Summer Budget Announced

Having met all the employer reporting deadlines that expire on 6July, employers can look forward to a second Budget on 8 July - billed as ‘a Budget for working people’.

Although the headline grabbing announcements are likely to be on spending cuts, the Chancellor is expected to confirm how he will fund the promised three million more apprenticeships and the increase in free childcare for working parents to 30 hours a week to help mothers go back to work.

Historically, tax revenues often increase dramatically in the first year of a new government with less dramatic increases the nearer it gets to the next election. However, election pledges commit the Chancellor not to increase the rates of income tax, NIC or VAT in this Parliament so we may see creative new ways of raising tax revenue. Aside from yet more pension changes, another crackdown on anti-avoidance is promised to collect an additional £5 billion and it will be interesting to see if any long established tax planning is reclassified as avoidance. For example, the Office of Tax Simplification has suggested that the Government could attack ‘false’ self-employment by introducing a new ‘contractors’ rate of NIC to be paid by the engaging company – in lieu of the Class 1 NIC that the engager saves by using a contractor rather than an employee.

If the Chancellor is committed to the Government’s new promise to cut red tape for businesses, we may see some more radical moves on tax simplification. For example, many would welcome the long promised ‘alignment’ of income tax and NIC – early in the parliamentary cycle may well be the best time to finally tackle this.

If you would like to send the Chancellor an “original and innovative idea” to be considered by HM Treasury during its policy-making process you can have your say by by filling in a short survey online or via email at budget.representations@hmtreasury.gsi.gov.uk.