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Budget will be on Wednesday 27th October 2021 Chancellor Rishi Sunak will make his Budget Statement on Wednesday 27th October 2021 to the House of Commons responding to the next forecast for the economy and public finances he commissioned the Office for Budget Responsibility (OBR) to prepare for publication on Wednesday 27th October. The Chancellor's statement will need to consider the economic and fiscal outlook in the light of emerging evidence since the bulk of the UK’s Covid restrictions were lifted in July and the announcement by the Prime Minister in September of a manifesto breaking tax rise to fund increases in spending on the NHS and social care. The Budget Statement will start at 12.30pm after Prime Minister's Questions and it's expected to last for a maximum of an hour. As usual we will have a prompt report on the statement and the measures announced by the Chancellor of interest to classic motoring enthusiasts which will posted here within an hour or so of his sitting down in the House of Commons. What could we see of interest to classic car enthusiasts? We hope the freeze on fuel duty will continue and also that there will be no further increases in Insurance Premium Tax (IPT). |
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Budget
overview - has inflation come back to haunt us? Despite some headline monthly inflation figures well above the Bank of England's (BoE) 2% target and wage increases running at up to 7% in some sectors, it seems that the BoE does not think it is wise to increase interest rates at this point in the economic recovery. With the increase in UK Government debt that the Chancellor has built up during the pandemic, the current BoE base rate means that the cost of servicing that debt is very low by historic standards and the Chancellor will want it to stay that way. However, even if it is clear by October that inflation is set to stay high, the BoE may not put up interest rates immediately: it's quantitative easing campaign will come to an end in 2021 anyway and this is expected to take away some of the inflationary pressures. If high inflation persists into 2022, it seems likely that the BoE will have to act and increase interest rates at some point during the year. Accountants BDO say "the current rumours are that, rather than further headline announcements, the Chancellor will announce a 'technical' Budget in his speech on 27th October - so the devil will no doubt be in the detail". BDO Budget predications Fuel duty Amid warnings that fuel prices could stay near record levels over the next few weeks - and following the UK's recent fuel crisis - the Chancellor is being urged to take action to help motorists across the country. Ahead of the Autumn Budget, the FairFuel UK campaign has asked the Chancellor to cut fuel duty or "at the absolute very least" keep it frozen. Whether he will announce any changes to the current fuel duty freeze - or indeed an omission of this - is something that will be followed very carefully in Chancellor's statement. It's worth noting that without any reference to an extension from the Chancellor the freeze will automatically end. That's because existing legislation around fuel duty stipulates how much it goes up by each year. UK public warms to road pricing as fuel duty replacement is considered The Government's ban on the sale of new petrol and diesel vehicles from 2030 has made reform of motor taxes an urgent question for the Treasury because the switch to electric cars means almost £30bn in fuel duty raised annually for the Treasury will need to be replaced. But politicians have shied away from introducing road pricing as an alternative, however recent polling for the Social Market Foundation suggests that the conventional political wisdom that voters are opposed to road pricing no longer holds true. Its research found that 38% back road pricing to replace fuel duty and other taxes, with just over a quarter opposed (26%). The rest were open to persuasion, the SMF said, and shared a strong public perception that fuel duty was a heavier burden than other taxes. Fuel duty is 58p per litre of petrol or diesel in the UK and the rate has been frozen by successive Conservative chancellors for more than a decade after becoming a politically sensitive issue after protests. The sales trend for electric vehicles (EVs) is significant - last month sales of battery electric cars reached a record 33,000, about 15% of all new vehicles sold in the UK in September, including almost 7,000 Tesla Model 3s. But EVs remain a small fraction of all cars on UK roads, currently between 1% and 2% of all cars on UK roads. Capital Gains Tax changes Unlike other types of investment assets, the profit you make upon the disposal of a classic car does not generally attract Capital Gain Tax (CGT). This is because cars are generally classed as a ‘wasting asset’ that is estimated to have less than 50 years’ worth of use remaining. Even if the vehicle remains in existence for a period in excess of those 50 years, the same exemption applies. The tax is paid when people sell assets such as shares or a second home. There are rumours that the current CGT rates may be tinkered with and it's been suggested that CGT rates could be aligned more closely with income tax rates, which could mean scrapping the current CGT rates of 10% and 20% (or 18% and 28% for property) and instead making everyone pay income tax rates on their gains. A report by the Office of Tax Simplification, published in November 2020, recommended that CGT rates should be increased to bring them into line with income tax. But it would be unlikely to raise significant extra amounts of tax, as it is typically paid by only about 275,000 taxpayers and raises less than £10bn a year. Wealth Tax There has been much political discussion about a one-off wealth tax to help pay for the huge debt built up by the UK Government providing various levels of COVID support measures. Some would prefer to see a more permanent wealth tax and others firmly against it but there are very few examples of wealth taxes that work well and over the last few decades many have been abandoned. The UK already has two ways in which to tax assets; capital gains tax and inheritance tax. Both of these regimes are far from perfect, but it arguably makes more sense to deal with some of the flaws in those two regimes rather than introduce a third asset tax. The UK Government has already discounted a one-off wealth tax so, although the conversations may well continue, but KPMG say they "would not expect the introduction of a wealth tax during this Government. But never say never!". |
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