Not quite a budget for the ages. Will it do it enough?
After a hard-hitting budget for businesses last year, this year it’s been the turn of individuals to bear the brunt of the government’s attempt to adhere to its fiscal promises while creating the necessary fiscal headroom.
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Budget announcements and Spring Statements are rarely shrouded in secrecy these days, with policies tested against public opinion as policymakers gather their plans.
While we largely knew what was on the agenda, what was truly unexpected was the sight of the details before the Chancellor even took the stand. The hallmark of any Budget day is the “rabbit out of the hat” moment.
Ultimately, the Red Book analysis tells the real story, setting the definitive tone for the government’s approach to taxation in the coming years.
Yesterday, we witnessed a continuation of tax by stealth. The further three-year freeze on income tax thresholds is not a new tactic, yet by 2031 it will mark a decade since those thresholds last moved. In that time, wage inflation will drag a vast number of workers into higher bands.
The 2024/25 tax year saw one million people pay the additional rate, and that figure will be substantially higher by 2031.
Other eye-catching announcements include the Mansion Tax, which will see owners of properties over £2 million liable for an extra tax charge, alongside a 2% tax increase on income generated by investors and landlords.
The reduction in the Cash ISA limit is also a clear bid to boost investment into the wider economy.
Our expertise lies in advising HNW and UHNW individuals on all aspects of their wealth, including truly complex financial planning needs. It’s striking how many come to us who haven’t utilised their full ISA limit.
Finally, the omissions were as telling as the measures enacted. The Chancellor resisted early calls for an exit tax, Inheritance Tax was not mentioned, and pensions remain untouched until 2029, when the salary sacrifice cap will take effect.
What is the strategic takeaway? This was not the disruptive Budget many were braced for.
The Chancellor will be hopeful that these targeted fiscal levers will be sufficient to boost the finances, removing the need for further tax raids down the road.
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Liz Ritchie is Head of Tax at Forvis Mazars. For over 25 years, she has been advising entrepreneurial business owners, professional services firms and high net worth individuals on their tax affairs.
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