Budget 2019: What could the Chancellor’s pre-Brexit Budget have in store for individuals and businesses?

Julie Palmer

Regional Managing Partner

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Budget 2019: What could the Chancellor’s pre-Brexit Budget have in store for individuals and businesses?

Updated: 7th January 2020

Budget 2019: Early Predictions

Sajid Javid’s first Budget is scheduled to take place on 6 November. Put off by the uncertainty caused by ongoing Brexit negotiations, the Budget has already been pushed back from its original October date and was expected to be the first Budget announcement to be made since Britain officially left the EU.

However, with uncertainty regarding an exit deal still raging, and Johnson's three-day timetable to get the with Withdrawal Agreement through Parliament being voted down on October 22, Javid will be setting out his proposals with Britain still officially part of the European Union after all despite his best efforts to avoid such a situation.

There has been no indication that the Budget will be postponed again following the rejection of the Withdrawal Agreement meaning Javid faces outlining the plans for Britain’s future spending policies during what is arguably be the most uncertain time in the country’s recent history.

The current state of play

Going into the Budget, the chancellor has seen government borrowing increase, totalling £9.4bn in September, compared to £8.8bn at the same point last year. This has been attributed to a general increase in spending across all Whitehall departments as well as funding the winter fuel allowance. This unexpected spending flurry could scupper Javid’s plans to inject billions of pounds into public services and infrastructure projects

According to figures from the ONS, in the six months since the start of the current tax year borrowing has been £40.3bn, a 21.6% rise when compared to the same period in 2018, when it was just £33.2bn - and this is even before the costs of Brexit have taken their toll.

While Javid has maintained his desire to increase borrowing in order to inject extra money into hospitals, schools, transport and the nation’s infrastructure, this additional borrowing has seen the Treasury set to fall short of its 2% annual public spending deficit limit. Javid may be feeling the pressure to lessen his planned spending spree in order to prevent him from flouting this rule further.

So, what measures could Javid introduce?

While the details of what the 2019 Budget holds are currently unknown, based on previous comments and promises made by the Chancellor, we can speculate what may form part of his plans on November 6.

Tax Reforms

As a self-proclaimed "low tax guy" Javid has hinted that reforming elements of the tax system is high up on his list of priorities. In fact at a Conservative Party event earlier this year he categorically stated that his first Budget “will include tax changes”.

Whether these potential changes will serve to benefit higher or lower tax payers is to be seen, however, Boris Johnson has made no secret of his desire to raise the threshold for the higher rate of income tax. Speaking in June this year he confirmed he was keen to raise the threshold from its current level of £50,000 up to £80,000.

"Going into the Budget, the chancellor has seen government borrowing increase, totalling £9.4bn in September, compared to £8.8bn at the same point last year."

Stamp Duty

It has also been speculated that Javid may introduce further changes to stamp duty. Radical plans would see the burden of paying this tax switch from the buyer over to the seller. While this would undoubtedly help first-time buyers and those looking to move up the property ladder, there are concerns that this could deter owners of larger family homes would otherwise consider downsizing once the property becomes too big for their needs. With a lack of available family homes across the country already, this move could well backfire.

Abolishing IHT

Javid has been clear on his dislike behind the premise of Inheritance Tax, stating: "I do think that when people have paid taxes already through work, or through investments and capital gains and other taxes, that there's a real issue with asking them on that income to pay taxes all over again.

"Sensible changes have already been made, but it is something that’s on my mind."

While abolishing IHT completely may be unlikely, another series of tweaks to lessen the impact on bereaved families could be on the cards.

Entrepreneurs’ Relief

Entrepreneurs’ relief, a tax relief scheme which allows some businesses to benefit from a reduced liability for CGT, is unpopular amongst the opposition party and has been scathingly described as “quite likely the worst tax relief in the UK”, by think-tank the Resolution Foundation.

While abolishing entrepreneurs’ relief entirely is unlikely to be among the changes announced, this controversial relief scheme does have a habit of generating a significant amount of attention in the run up to a Budget announcement.

Labour have made no secret of their desire to see the tax relief scheme abolished and in spite of changes brought in last year to narrow its use, Entrepreneurs’ Relief still comes at a high cost to the Treasury. In the 2017/18 tax year, Entrepreneurs’ Relief came in at an estimated £2.3bn cost to the taxpayer, and although projections show this is set to fall, HMRC figures still anticipate this will still translate to a cost of £2.2bn in 2018/19 and £2.1bn in 2019/20.

Business Rates Reformations

Federation of Small Businesses have publicly asked Javid to announce measures to help struggling businesses up and down the country.

There have been calls for the Retail Discount, which gave those retailers with property valued no more than £51,000 a 33% discount on business rates to be made more generous by way of an increase to 50%. While the relief scheme was aimed at giving a much needed boost to the beleaguered high street, the FSB have asked for this to be extended to cover all small businesses regardless of the sector they are operating within in order to give businesses some good news following the last couple of years of Brexit uncertainty.