CashNews.co
UK businesses have been hit with a sharp rise in taxes in the first Labour Party budget for 14 years.
The government has committed to fund a cash injection for the health service by borrowing more and by raising taxed.
If the government is to be believed, it is a budget to boost growth. But critics respond that any boost to growth will be short-lived.
Capital gains is up, employers national insurance contributions are raised and stamp duty rises on second homes.
RBI has canvassed opinion from a number of industry experts..and a number of common emerge, including relief that the threatened tax hikes were not worse and at least some agreement that the budget now provides a degree of certainty and stability.
Simon Allister, head of wealth planning, LGT Wealth Management
Tax was once considered one of life’s two certainties. But the chancellor seems aware that this is no longer the case for the internationally mobile wealthy, with multiple references today to maintaining the UK’s “competitiveness” against low-or-no tax jurisdictions.
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There remains little granular detail around the abolition of the non-dom regime, which is disappointing given April 2025 is fast approaching. Taken in isolation, the changes look palatable for private clients relative to recent rampant speculation. That said, a sizeable minority will be significantly impacted. The impact on family businesses and those with significant pensions savings will be profound and it remains to be seen what the knock on impact will be on the government’s optimistic growth objectives.
Jessica Cath, Financial Crime Partner at Thistle Initiatives
The crackdown on welfare scammers announced in today’s budget demonstrates that reducing fraud is a clear priority for the new Labour government. It’s great to hear that innovative methods are being introduced to prevent this kind of illegal activity, along with new legal powers to stamp out fraudsters. This should serve as a message to all industries that the fight against financial crime is being taken seriously. Hopefully this is a step towards a more agile, responsive, and effective system for combating financial crime across the UK. In my opinion, to make this even more effective in the long-term, we need to see an ongoing, collaborative approach between the government, financial institutions, regulators and tech firms.
Simon Harrington, Head of Public Affairs at PIMFA
Savers and investors will draw little consolation from the fact that measures announced in the Budget by the Chancellor today could have been worse.
We accept that the Chancellor has sought not to place a burden on working people (however this government chooses to define them), but in targeting Capital Gains Tax (CGT) in particular, this government risks stymying the very investment it seeks to stimulate economic growth. The government’s desire to utilise capital from pension funds to aid this has been much discussed, and we urge them not to needlessly erect further barriers for retail investors who can also play a crucial role in delivering growth.
Whilst we welcome the government’s extension of the inheritance tax threshold, the decision to change reliefs associated with it as well as the decision to bring pensions in scope will impact the effectiveness of people’s financial plans across the country and – in some cases, it may introduce doubts about the value of previous estate planning advice – specifically advice related to pensions. The value of financial advice is the certainty of outcome it can provide, and the confidence consumers can draw from that as a result. Constant tinkering with this regime diminishes the perceived value of holistic financial planning in particular.
Going forward, the Government should prioritise stability over future changes. We have been very clear that the government should adopt a taxation roadmap for personal taxation similar to the approach outlined for businesses in this Budget. Doing so would be enormously helpful and reassure savers and investors who need the confidence to know how their wealth will be treated both in accumulation and decumulation.
Rory McGwire, founder of Start Up Donut
This government appears committed to addressing the tough financial realities they’ve inherited, and for that, I commend them.
However, it’s ironic that the hardest-working segment in our country – families who run small businesses – are being hit the hardest by these ‘Make Work Pay’ changes. While I’m relieved the Employment Allowance offers some relief for the smallest businesses, who often struggle the most with covering their costs and complying with the seemingly endless rules on tax and employment, the recent focus on ‘protecting the workers’ has created a sense of a ‘them-and-us’ divide in this Budget.
Small businesses account for 48% of employment in the UK, yet this approach seems to pit employees against their employers. For many, the risks, workload, and challenges of running a small business may start to feel like they no longer match the limited rewards.
Dan Olley, CEO, Hargreaves Lansdown
We recognise the difficult choices the government faced in today’s Budget and so it was clearly going to be mixed messages for the UK’s savers and investors.
Clearly, the Chancellor was listening when it comes to tax-free cash in pensions, and protecting those who have done the right thing, steadily investing in their retirement accounts to secure their financial future. Investing for later life is a long-term endeavour and so stability of policy is key if we want more people across the UK to benefit from the power of compounding to deliver a comfortable retirement.
It was also welcome that the potential consequences of dragging more people into higher income tax brackets through frozen thresholds was avoided. However, some of the other changes to inheritance tax and capital gains tax will be a disappointment for some.
We know from our own data on financial resilience that just one in five in the UK can expect a comfortable retirement, so as a nation we need to do everything possible to make it easy for people to save and invest.
Despite the gives and takes in today’s Budget, the most valuable investing tool we all have is time. The earlier you start, the greater benefit from compounding over time. Therefore, it’s vital that people don’t get distracted by today’s announcements or take this as a disincentive to continue to save and invest for the future.
With this budget behind us, I hope that this now provides the certainty, simplicity and stability required to give the retail investors across the country the conditions they need to keep investing and achieve their financial freedom.
Matt Ryan, Chief Transformation Officer at Reef, Powered by Totem
Despite the near-constant influx of news about the promise of AI – including the head of OpenAI promising that an AI ‘super-intelligence’ may be ‘a few thousand days away’ – the UK government has already halted a planned £1.3bn investment in AI and related technologies.
However, the Autumn statement announced intentions to publish an Artificial Intelligence Opportunities Action Plan, that will set out a roadmap to capture the opportunities of AI to enhance growth and productivity and better deliver services for the public. Our hope is that this shines a spotlight on the industry and encourages investment.
The tech is already transforming the financial industry and has boundless opportunities to further enhance efficiency, personalisation, and security. However, it’s not just investment that’s needed to maximise the impact of AI technology, there’s a large body of work that needs to be done to educate businesses on best practice and how to ready itself – starting with building a volume and quality of data for this intelligence to work from. Just as you wouldn’t put custard in a Ferrari, there is no point adopting the latest AI if you haven’t got accurate and clean data to fuel it.
Before businesses run towards the latest AI technology, they should first be looking at how they can gather data in a way that is effective, efficient and transparent. Doing this will lay the foundation for the truly game-changing AI applications of the not-so-distant future.
Susannah Streeter, head of money and markets, Hargreaves Lansdown
The cloud of confusion hovering over retail investors has lifted with the government holding off from tinkering with ISAs. The Budget announced that ISA, LISA and JISA allowances would stay frozen until 2030. This should help maintain confidence in what is the cornerstone for retail investment in the UK. UK retail investors are enthusiastic holders of UK equities, at HL around 35% of our clients hold UK equities directly with 75% of trades by value taking place on the London market. Maintaining tax free allowances will encourage greater long-term investing and saving and but other nudges are also needed to help encourage more people to take the first steps on their stock market journey.
UK ISA plans axed
It’s a relief to see plans for a UK ISA dumped on the scrapheap. It was a well-intentioned idea but was set to lead to unfortunate consequences. The plan was to direct shareholders money into UK-listed companies, but such a move would have added unnecessary complexity and could have a negative impact on UK investors. If they had been nudged into a UK ISA, it would have potentially increased risk by unnecessarily concentrating portfolios. This could be a detriment, especially if there was more volatility in the London markets compared to others. For some people, the complexity may have put them off putting money into equities, given that simplicity is what many investors desire.
Small-cap market: blow to investors
The reduction of tax breaks on AIM quoted stocks is a blow for investors in the small-cap market, and although some have clawed back losses given the business property relief was not completely scrapped, trading is likely to remain volatile. Investing in such companies, given how fledgling some are, is a risk, and some investors might have been prepared to take given that IHT wasn’t due on such portfolios as long as they had been held for two years or more. There could be longer-term economic implications here given that this small change might have big repercussions when it comes to creating a nurturing environment for entrepreneurial businesses, which may be counter-productive to the Chancellor’s growth agenda.
CGT changes: backward step
The changing CGT landscape creates uncertainty, with wealthier investors, who have maxed out their ISA allowances, now facing increased tax on equity gains. However, the hike to 24% was not as high as many feared it could be. Ultimately this move is a backwards step and may prompt investors to take profits bit by bit by using their allowances to realise gains and parking this money elsewhere.
The UK market is an income king, and enjoys the highest dividend yields among its peers, including the S&P, DAX, CAC 40. But these benefits are being swallowed up by the low level of the dividend tax allowance, which had already been slashed from £5 thousand in 2016, to £500 pounds. The chance has been lost to incentivise investment by increasing this allowance, especially given the government says it wants to encourage investment in UK assets.
The UK remains out of line with other leading nations in the world, given that the stamp duty payable on shares listed in London will remain the highest in the G7. It’s illogical for investors buying UK shares to have to pay our high stamp duty when overseas trades have a lower rate or are stamp duty-free. It means the playing field for UK plc remains uneven, which may hold back vital funds for British based companies hoping to grow, given that the 0.5% tax will still be payable by investors.
The Chancellor made a series of announcements about her National Wealth Fund. While it has lofty ambitions to attract inward investment from the big beasts of global finance, opportunities need to be created for armies of smaller retail investors, who together would be a significant force for good in helping boost growth. Opportunities to invest in growth companies are few and far between with retail investors left out of most the stock market flotations. As plans for the Fund develop, we look forward to building out opportunities for retail investors.
Jason Whyte, Financial services expert, PA Consulting
Despite widespread expectations of reform to pensions tax relief, the Chancellor only revealed one major change in her speech.
Inherited pension wealth will now be included in the scope of Inheritance Tax (IHT) from 2027. This addresses an anomaly in how pensions have been treated relative to other wealth – around 8% of estates include pensions that until this change were exempt from IHT. More widely, pension savers and their advisors will be breathing a sigh of, well, relief that there were no changes to pensions tax relief or a cut to the pensions commencement lump sum (popularly known as “tax free cash”).
There could be a flurry of activity to undo pensions transactions in the wake of the Budget.
There was a widespread expectation of changes to allowances on pensions and financial advisors reported customers crystallising their pensions early to lock in tax free cash at pre-Budget levels. But the Chancellor did not introduce any changes – so pension providers may be receiving requests to undo those transactions or cancel any that were set to take effect later.”
The State Pension Triple Lock remains until 2029.
The Chancellor committed to maintain the Triple Lock through to 2029, with pensions set to rise at 4.1% compared to inflation of 2.5% next year. That will see State Pension spending reach £31bn by 2029. The Triple Lock is a popular measure and Chancellors have faced significant backlash for trying to change it – but it guarantees that a major area of Government spending will grow at least as fast as inflation. It will eventually need to be reformed, but that has perhaps been left to a future Chancellor.”
The Chancellor has launched a Pensions Investment Review that is likely to encourage more public-private investment in UK infrastructure and growth-driving sectors.
Final salary pensions have historically been big investors in infrastructure and other long-term projects. But defined contribution schemes often feel that they cannot invest significant amounts in illiquid investments, while also meeting regulatory requirements to offer customers easy switching between funds. The pensions review is likely to listen to providers’ concerns and make investment in long-term assets easier.
Subscription limits for ISAs have been frozen until 2030
This means that savers can shelter a smaller proportion of their savings in real terms from CGT and income tax. While this has a relatively small impact in the early years, it is forecast to increase the tax take by £605m in 2030. The previous Government’s proposed British ISA is also scrapped.”
The government has indicated that digital innovation, including the Digital Information and Smart Data (DISD) Bill, is a priority.
DISD will provide the primary legislation to expand Open Banking into a wider Open Finance and Open Data regime. But it remains to be seen how quickly it will move – and whether it will provide the incentive needed for the industry to deliver the consumer innovation and value that the government and regulators want.
