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Mark Smith, Corporate Finance Director, shares his perspective on what to expect in the Autumn 2024 Budget and how we can help you to navigate the potential changes.
It won’t have escaped your notice that we have a budget announcement set to take place on Wednesday 30 October.
Now officially called the Autumn Budget (having been termed the Autumn Statement under the previous regime) it’s the first for the new Government and the first budget under Labour since 2010.
The state of public finances and the economy will vary from “dire” to “the worst is over” and “things are on the up” depending on your choice of newspaper.
But the headline from the Office for Budget Responsibility on the last commentary (issued 20 September 2024), was that borrowing was marginally ahead of the comparable period last year and above forecast. With the key narrative that “higher than expected borrowing continues to be driven by departmental spending, particularly consumption on goods and services which is £8.5 billion above forecast”.
Our various Scrutton Bland ‘fortune tellers’ have tabled their predictions already – you can read them here. But it’s fair to say that none of the predictions were overly optimistic. Unless, of course, you count ‘not as bad as feared’ as being an optimistic prediction.
The current budget deficit
So, why the gloom and doom?
Well, to coin a phrase ‘It’s the deficit, stupid’.
The current budget deficit is the difference between the Government’s day to day spending and its revenues. Akin to a bank overdraft, although in 2023/24 the deficit was £49 billion, so perhaps a little more than your average.
That’s a lot of money and, to add some context, at the end of 2023/24 the public sector net debt, to a degree an accumulation of overspends, sat at £2,690 billion. That’s £38k for every person in the UK.
Based on this, and of course depending on your political views, you’d think governments would cut spending or increase taxes…
However, the Government’s favoured response will be that we will grow the economy, despite successive governments having failed to do so.
‘Lettuce’ not forget that this was a key part of Liz Truss’s plan, but if you strip out anything COVID recovery-related, growth has been almost non-existent over the last five years.
Einstein’s quote “The definition of insanity is doing the same thing over and over again and expecting different results” does spring to mind here.
My point here though is that growth is not an easy fix – easy to say but clearly much harder to deliver.
So, just in case the planned growth doesn’t work out, the Government’s fall-back position is to raise revenue rather than cut spending, with at least one notable exception – the Winter Fuel Allowance.
But even raising revenue is not that easy.
Raising Capital Gains Tax (CGT) rates and clamping down on non-doms will not, depending on some reports, raise significant amounts of revenue. But they would appear to fit within the Government’s election mantra of not raising tax on ‘working people’.
The Government’s targets have moved from Inheritance Tax to pension reliefs and the preferred option now seems to be an increase in Employers National Insurance contributions. There’s a debate to be had as to whether that counts as a tax on ‘working people’. Because whilst it’s not a direct tax that will impact on the pay packet of individuals, along with other recent announcements it will not be seen as an incentive to employ staff which is a key consideration when it comes to growing the economy.
So, what will be in the Autumn Budget?
Whilst the government have previously made vague references, such as ‘those with the broadest shoulders should bear the heavier burden’ and the election mantra of not raising tax on ‘working people’, speculation is rife.
There does seem to be a widespread consensus that Capital Gains will be targeted, with an increase in rates (although surely an aligning of rates would be counterproductive) and changes to Business Asset Disposal Relief are likely.
But every professional I talk to at the moment is effectively sold out until the 30 of October and as one has commented “I suspect my litigator contacts will be very busy in the new year when sanity is restored”.
Given where we are now it really is too late to be contemplating a new transaction or a shareholding change. But if certain changes are announced to be effective from 6 April 2025 we will, I am sure, see a further round of panic and transactions entered into for tax reasons.
Of course, by this I mean that transactions would be contemplated for fear of what forthcoming tax changes might be, as opposed to being part of a long-held strategy.
Whilst easy for any professional adviser to say that you should not contemplate a transaction or a shareholder change just for tax reasons, of course that’s easier said than done, particularly in the current climate.
So, what can you do?
My advice to clients or potential clients is always the same – come and talk to us.
Whilst a raft of phone calls on 31 October wouldn’t be ideal, I’ll be at our Budget Breakfast Event – which you can still join us online for here – and digesting the Halloween themed newspaper headlines – ‘Nightmare on Downing Street’ is sure to make an appearance.
However, if you’re contemplating a transaction then do get in touch in the first week of November.
By that point we’ll have had a chance to digest the budget announcements, including the effective date of any various changes, and we’ll be more than happy to talk you through our take on how this Autumn Budget will impact you and which of our transaction services will help.
To reach out to Mark or a member of the Scrutton Bland Corporate Finance team, call 0330 058 6559 or email hello@scruttonbland.co.uk.
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