The Chancellor’s Spring Statement didn’t introduce any immediate tax rises but that doesn’t mean we’re in the clear. There’s a growing sense that tax changes could be on the horizon. This latest update might appear calm on the surface but underneath it tells a more cautious story.
Last October Rachel Reeves introduced the Stability Rule – a target that says government must at least match its everyday spending through what it receives in tax and other revenue. At that time the Office for Budget Responsibility (OBR) calculated that this goal would be met with a £9.9 billion buffer.
However, by March the picture had changed dramatically. The OBR recalculated the margin (often called headroom) in preparation for the Spring Statement and concluded that, with no changes, the Stability Rule would be missed by £4.1 billion – a £14 billion reversal.
“There’s a fine line between confidence and caution” says Philip George, Partner at Forrester Boyd. “That £9.9 billion might sound like a comfortable buffer but in reality it only represents around 0.7% of government spending. One change in economic forecasts this autumn and the Chancellor could be back to square one.”
If the Government misses the Stability Rule again in the autumn Budget it’s likely that tax rises will be back on the table. In fact there are already early signs. Tucked away in the Spring Statement was a comment about reviewing the balance between cash and shares in Individual Savings Accounts (ISAs). Reducing the amount that could be placed in cash ISAs would yield extra revenue, because it would mean less tax relief being given.
The message is subtle but clear. The numbers may add up for now but they are finely balanced and future changes are possible. The Chancellor has only one fiscal event left this year – the autumn Budget – and it may carry more weight than usual.
As Philip puts it “Planning ahead is becoming more important. Whether you are a business owner a landlord or someone with personal savings it's worth checking in on your position while you still have time to act.”
All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.