No sooner had we discussed the potential for tax rises to be included in the Chancellors’ Budget on the 26 November, it now seems that the Government may have had a change of heart.
It was never going to be the most popular choice, given it would lead to a renege on the Governments’ manifesto not to impose increases to personal taxes but we can’t forget the current pressures facing businessesas a result of the rise in employers NIC since April this year coupled with a reduction in the Secondary Threshold has hit many businesses as they try to manage internal budgets.
In an article published by the Financial Times it appears that the Chancellor may not have the appetite to seek increases to income tax but this does not rule out the potential to fill the gap in the economy purse in other ways.
So what areas might be considered, a possible extension to the freeze on the Personal Allowance and the NIC upper earnings limit which was due to be lifted in 2028, you may recall this deadline was extended by the previous Chancellor Jeremy Hunt.
Estimations by the Institute of Fiscal Studies (IFS) confirmed if the Chancellor chose to keep all currently frozen NICs and income tax thresholds frozen for two further years (until April 2030), for example, this would raise a further £8.3 billion a year by 2029–30.
This could impact pensioners, with the triple lock increases the state pension is expected to exceed the personal allowance in the next few years, good news for some but this means some of the lowest paid who are in receipt of purely the state pension will pay income tax for the first time.
With the erosion of some of the tax breaks in place for electric cars the Chancellor may seek to introduce a new pay-per-mile charge for electric vehicles from 2028, following a consultation. The Financial Times reported that a 3p per mile levy would raise about £1.8bn annually. This new tax would apply in addition to the annual vehicle excise duty payable in respect of all road vehicles except for certain classic cars, disability scooters and bikes connected to the medical profession that carry blood donations.
More research will be needed to establish how this will operate in practice and how exactly government will establish the number of miles undertaken to be able to correctly access the extra mileage charge, the finer detail is more around who and how this can be managed to minimise administrative burdens on those impacted by these measures.
So for now all we can do is wait for the delivery of the Autumn Budget, which for many will be a tense time.
