Written by Gavin Foster, IFA at Ascot Lloyd
Ahead of the mini-budget tomorrow (23rd Sept.), Gavin Foster, IFA at Ascot Lloyd gave his thoughts.
During the election campaign, Liz Truss positioned herself as a traditional, tax-cutting Conservative. We can expect the Chancellor to align with this position by announcing a series of cuts on Friday.
Most likely to be announced is a cut to corporate taxes (effectively cancelling Sunak’s previously announced increase from 19% to 25%), a reversal of the 1.25% National Insurance increase that took effect in July, a removal of the EU cap on Banker’s bonuses and possibly a cut to Stamp Duty.
The proposed increase to National Insurance by Boris Johnson’s government last year was unpopular within Cabinet and was considered a ‘tax on jobs’ so a cut may stimulate job growth. That being said, it will primarily benefit high-income earners and provide little benefit to those on low incomes so it will not do much to soften the cost of living crunch that many are feeling. According to the Institute For Fiscal Studies the poorest 3 million households in Britain will only be 63p a month better off after the cut to NI.
The removal of the EU cap on Banker’s bonuses also risks being unpopular among the broader electorate but will be viewed as a Brexit benefit among party members. The economic rationale is that it will help London’s competitiveness globally against other financial centres such as Hong Kong and New York.
There is also the potential for a cut to Stamp Duty as a way of stimulating the property market which is expected to slow in 2023 when rising interest rates start to hit buyers.
In as much as any budget whether mini or not, it has the potential to surprise so we will have to wait for tomorrow to have the full picture, but there is a lot for the new Prime Minister and her cabinet to do and this is an important first indication of their priorities.
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