After months of speculation of tax reforms to help pay for the covid-19 bill, the UK government will not yet make these decisions in the Autumn budget.
HM Treasury said that “now is not the right time to outline long-term plans”, as chancellor Rishi Sunak scraps the November budget to focus on the economic burdens of the coronavirus pandemic.
But, there will be a spending review where the government will reveal how much each department is allowed to spend.
Any major fiscal decision has been pushed back to the Spring.
Repair and recover
Rachael Griffin, tax and financial planning expert at Quilter, said: “The time to fix the roof is when the sun is shining, so it makes sense for the chancellor to delay the tough decisions until at least next Spring. By then government will hope to have a much better idea of whether an effective vaccine is viable for next year, and the UK’s longer-term relationship with the EU ought to be clearer.
“At the moment, it would be extremely challenging to make long-term policy decisions with so much up in the air. As we learn more over the coming months, it may become a little easier to build an informed projection about the trajectory of the economic rebound.
“In turn, that makes it easier to build an evidence–based case for what may be some difficult policy decisions.”
Griffin believes the government has the tough job of maintaining some balance while trying to get a grasp on the second wave of covid-19 infections.
“The Conservatives will likely wish to maintain their reputation for prudence by reducing debt over the course of the parliament, as they promised in their manifesto. Although the goalposts have changed somewhat, it is difficult to see the chancellor throwing caution to the wind and abandoning that pledge altogether.
“That means he faces the deeply unenviable task of repairing public finances without implementing tax policies that adversely impact recovery.”
‘No overnight changes’
Genevieve Morris, head of corporate tax at Blick Rothenberg, said: “The announcement that there will be no budget this year comes as no surprise.
“It would have been difficult for the chancellor to announce tax changes in the Autumn which are aimed at recouping the costs of the pandemic, whilst the country is still in the grip of a second wave.
“What we need from the chancellor now is a promise that there will not be overnight tax changes announced in the Autumn, or reforms which put additional burden on individuals and businesses.
“A promise from the chancellor now will remove the ambiguity which is worrying people at the moment and at least provide some certainty over the next six months.”
But there is more Sunak could do to reassure taxpayers, Morris added.
“He could go a step further and extend the deadline for repayments of the deferred tax liabilities for individuals and businesses that really need it the most. This would at least provide some comfort to those that are facing a bleak winter ahead.”
