The world has changed… UK Taxes will not (for now!)

The aftershocks from the impact of their first budget delivered in October 2024 are still being felt by advisors and trustees across the Channel Islands, together of course by many of their clients. The impact of this most recent budget by comparison is, it is fair to say, rather non-existent. Very early on in the speech, it was stated that there would be no tax increases announced.

For those that have been wrestling with the sweeping changes made to the taxation of UK resident non-doms and Inheritance Tax which take effect from April 2025, this will be welcome news.  The time for planning for these changes is almost over, save perhaps for any last-minute flurry of wealthy individuals boarding flights over the next few days to depart the UK for good. There will undoubtedly be a collective sigh of relief across the Islands this afternoon.

This was a statement that in some ways did not look or feel like a budget statement. There was none of the usual theatre of the Chancellor holding the red box outside of Downing Street, and the speech itself lacked some of the usual ceremony and noise that goes along with it. There was no challenge after the speech by the leader of the opposition party, instead this was left to the Shadow Chancellor.  In truth, it all felt a bit flat, which may be due in part to a wish to avoid the sort of negative headlines that followed on from the October budget.  

Much of the narrative in the lead up to this budget was around how “the world has changed” since the Labour party took up government. The extent to which this is true is up for some debate. It has though seemed that this mantra is, to an extent, being used to justify some of the hard truths that the UK is facing.

The current government made economic growth one of their key pledges. The issue is that there has not been much (or any) growth since coming into power. Whilst it is early days still into the parliamentary term, the UK economy is flatlining, inflation and borrowing are on the rise, and the government are trying desperately to look at ways to rein in welfare, state and NHS spending. On the rapidly approaching horizon is also a need to increase defence spending by many billions a year.           

Other than reducing costs, and with a desire to limit borrowing, how else can the government raise more money? Naturally there has in recent times been talk of yet more tax changes. This has included that of a potential Wealth Tax, or increases in VAT, Income Tax or National Insurance.  The issue for the government though is that they pledged not to do such things in their manifesto. The rise in employer NICs announced in October, and which takes effect from 1 April 2025, was already seen as quite a bend of their pledges that they may feel they cannot repeat.  

However, given that “the world has changed,” this may be something we will hear a lot more of and be used as a rationale for further tax changes in the future. We all await the next Autumn Statement later this year.

There is now, hopefully, seven or so months of relative stability in UK taxation, until of course we see what happens next driven by this changing world.