Jeremy Hunt's first Budget as Chancellor was widely anticipated to be a fairly boring affair. With the economy in a difficult spot, his principal focus was expected to be trying to balance the need to grow the economy with political imperatives to avoid favouring wealthy individuals and businesses.
Pensions - the lifetime allowance
With concerns over doctors, in particular, retiring early as a result of the level of the lifetime cap on pensions, he was expected to raise the cap to £1.8bn. It, therefore, came as quite a surprise when he withdrew it completely, while also raising the annual allowance for pension contributions from £40,000 to £60,000.
Unsurprisingly, celebrations were muted by Labour stating their intention to reverse this change following a change of government. This makes planning difficult for people, given the inherent uncertainty as to whether we may see a Labour victory at the next election, and commentators have expressed concern about pensions becoming a political football.
With the exception of that significant change for individuals at the top of the earning scale - time will tell what impact it has on the drain of consultants from the NHS - there were very few big announcements.
Predictions v outcome
Commentators' predictions for the Budget weren't very exciting. No one was expecting major changes to the tax system - whether capital gains tax (other than those already announced, including in relation to divorcing spouses), inheritance tax or anything else.
Non-doms
The Opposition had raised concerns about the continuing "loophole" for wealthy non-doms of the remittance basis system of taxation. There was some speculation that the time period before a non-UK domiciled individual is deemed to be UK domiciled for tax purposes, and loses access to the remittance basis, might be reduced from 15 of the last 20 tax years of UK residence, to 10. Others thought that the Chancellor might instead announce a consultation on the topic, effectively kicking the can down the road. In the end, however, domicile was never mentioned, and neither were wealthy individuals generally.
The Budget included some measures relating to the prevention of tax avoidance, and increased penalties for tax fraud, but there was little of substance in those areas either.
Tax reliefs and allowances
Pre-Budget predictions had included some tinkering with tax reliefs and allowances, including a possible lifetime cap on ISAs, which never materialised.
There were also predictions that less popular reliefs might be withdrawn, for example, Investors' Relief (IR), which has tended to be overshadowed by its better-known cousin, Business Assets Disposal Relief (formerly Entrepreneurs' Relief). As their names suggest, they target different circumstances, and IR may be overlooked in favour of others such as EIS relief, for example. In any event, there was no mention of it, so it lives to fight another day, as do the other IHT reliefs that commentators feared might be amalgamated into one annual allowance, possibly as part of a drive for simplification.
Brexit-related restrictions
Although it wasn't a focus, Brexit did have a part to play among the less heralded Budget measures. From April 2024, ISAs and Child Trust Funds will have to be managed by financial institutions with a UK presence. From the same month, IHT reliefs for agricultural property and woodlands will be restricted to land in the UK, whereas currently, they can also apply to land in the EEA, the Channel Islands and the Isle of Man. Instead, from next year, property in those areas will be treated like property anywhere else in the world.
Similarly, tax relief will only be available for charities and Community Amateur Sports Clubs (CASCs) that are located in the UK, whereas previously, those in the EU and EEA could also qualify. This change comes into immediate effect for new applications for relief, but there will be a transitional period until April 2024 for EU or EEA bodies that currently qualify for reliefs.
None of these changes come as a surprise, given our departure from the EU.
Low-income trusts and estates
A small, but significant, change for executors and trustees is the plan to legislate proposals from the government's 2022 consultation to formalise and extend an interim concession removing trustees and personal representatives (PRs) from income tax where the only source of income is savings interest, and the tax liability is less than £100. The limit will be increased to £500, and this will take effect from April 2024.
The effect of corporation tax rates
However, probably the most significant issue for the economy overall is the corporation tax rate increasing from 19% to 25% in April for companies with profits in excess of £250,000 (and a sliding scale for companies with lower profits). While the Chancellor tried to ameliorate this, with increases in capital allowances, for example, the concern remains as to how attractive the UK will be as a place for business, when there are other countries offering lower rates. On this we will have to wait and see, but it may explain why the Chancellor avoided announcements that might further deter wealthy foreign individuals from moving to or investing in the UK.
Post-Match Analysis
And so, rather than leaving the title's football analogy untortured, we end up with a game of (sort of) two halves. One with a surprise goal that everyone talks about in the pub afterwards, and the other where the crowd leaves before the final whistle to avoid the traffic. It will be interesting to see how the season develops from here.
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