Next week we will receive our second budget speech of the year from the Chancellor, Philip Hammond. Two budgets in one year – why?
Well, the UK is the only major advanced economy to make major changes to the tax system twice in a year. Many leading financial institutions have been calling for this to change so that there are less changes to the tax system promoting more stability and certainty. So, the move to a single fiscal event happened this year after the Spring Budget, with this second budget in November needed to switch to the new timetable that will be followed in future years.
From winter this year we expect that Finance Bills will be introduced following the budget with the aim of gaining Royal Assent in the spring before the start of the following tax year. In fact, this makes perfect sense as changes in tax law can be fully scrutinised before the year that they are going to take effect. An Autumn budget also means that tax changes will be announced well in advanced of the start of the tax year.
So, what becomes of the spring statement? The Office for Budget Responsibility (OBR) is required by law to produce two forecasts per year. This means a Spring Statement will still be made in response to the OBR forecast. Although the government do retain the option to make changes to fiscal policy in the Spring Statement it is more likely that they will use this to consider long term fiscal challenges and start any consultations that need to take place.
As a snap election was called following the Spring Budget the Financial Bill had to severely trimmed so that it could be passed in time. This means that many of the budget announcements were never made law, for example, the reduction in the tax free dividend allowance to £2 000 which I mentioned in my blog of September 18th. I would be delighted if sense prevailed and this was dropped from the budget.
The usual media frenzy has started with speculation of what the budget will hold. However, after the snap election the current government does not hold the complete mandate that they wanted to do what they seemed necessary. I continue to petition Government on behalf of small business and am awaiting a response from Philip Hammond’s office after meeting with my MP, Rt Hon Greg Clark. Next week we will wait till Budget Day before posting our weekly blog; my hope is that it will be understanding to the cause of the modern SME but then, deep down, I do still believe in Santa!