Tag Archives: Budget

Accountancy & Accounts, FInance, Finance and Banking, Wales

ACCA Cymru/Wales on the draft Welsh budget

Lloyd Powell, head of ACCA Cymru/Wales, in response to the draft Welsh budget said:

“Following on from the extra spending on public services announced in the UK Budget in October, the draft Welsh Budget saw additional £1.5 billion of spending announced on public services, including the NHS and local authorities. Spending announcements in the draft Budget were firmly in line with the four priorities outlined by the First Minister earlier this year.

 

NHS

 

“Recognising the significant challenges the NHS in Wales faces, with an ageing population, increasing demand, persistent health inequalities and skills shortages, the 2025/26 draft Welsh Government budget saw a further £600 million allocated to Health and Social Care in Wales – amounting to over 50% of the total Government Budget. This needs to be accompanied by service reform and productivity gains. WG needs to redouble its efforts to address the fundamental challenges as outlined in ‘A Healthier Wales’ in 2022, including reducing waiting times, increased use of technology and investing in the workforce for the future.

 

Business support/skills

 

“Businesses in Wales continue to face challenges in 2025 and into 2026 which have adversely affected business confidence. These include higher employer National Insurance contributions and other rising costs such as the National Minimum Wage.

 

“The commitment to continue to support skills provision is welcome. The importance of supporting people into high-quality jobs, which are designed to drive economic growth and tackle poverty cannot be overstated. The additional investment of £6.5m resource funding to support the Flexible Skills programme, particularly in those sectors associated with decarbonisation, is a positive announcement.

 

“The announcement to extend non-domestic rates relief for businesses in the retail, leisure and hospitality sectors at the current 40% will help Welsh businesses in these sectors, although there will be concern at what support will be available beyond 2025/26.

 

“The announcement on accelerating planning decisions to grow the Welsh economy will be welcomed by many Welsh businesses looking to expand, as will announcements to improve the transport system in Wales. Businesses will hope that improvements in these areas will be delivered at pace to support the growth of the economy across all of Wales. .

 

Climate Change

 

“The additional funding to support climate change is welcomed as Wales continues to transition to low carbon industries and developing renewable sources of energy which also provide high skill jobs for Wales.

 

General

 

“The draft Budget only outlines spending plans for one year. Multi-year settlements for resource and capital at the conclusion of the UK Spending Review in 2025 will provide much needed certainty for the Welsh Government and its partners.

 

“The draft Budget needs the support of at least one opposition party, and it will be interesting to see how the discussion and debate on the draft budget develops in the new year prior to the Budget’s final approval in February 2025.

 

“Welsh Government needs to work with all partners, including businesses and the UK Government, to ensure the successful delivery of programmes of work that benefit the Welsh economy and society.”

Business, Economy & Jobs News

Chambers Wales South East, South West and Mid comment on Autumn Budget

Gus Williams, interim CEO at Chambers Wales South East, South West and Mid, said:

“This was always going to be a difficult budget. The headlines are going to be the £40bn increase in taxes which was inevitable given pressures caused by demographics – an ageing population – increasing numbers of people not participating in the workforce, and the need for long term public investment.

“The approach has been to try and spread the additional tax burden as widely as possible without touching income tax or VAT, focusing on those taxes that provide most certainty that the rises will increase the tax take in the short term. This means changes to Employers NI, inheritance tax, agricultural and business disposal relief, Capital Gains Tax, second home stamp duty, abolition of the non-dom regime, air passenger duty, tax on vapes, VAT on private schools.

“Changes to Employer NI, just increasing the rate to 15% and reducing the threshold from £9,000 to £5,000 rather than including pension contributions means a slightly lower rise in Employers NI than had been flagged, and makes sense as it retains the pension contribution incentive. But it will be a burden to businesses, particularly in some sectors where wages are at the lower end and where staffing costs are a high proportion of overall costs.

“The increase in the National Minimum Wage and increases to Employers NI will undoubtedly squeeze small business margins, and small business will want to see evidence of government investment, and other initiatives that grow the economy and increase opportunities to counter this squeeze on margins – or the cost pressure on small business could have consequences on hiring and investment.

 

“Some will be upset about the increases in Capital Gains, but it is worth noting that the rises in CGT broadly take us back to where they used to be, there are various exemptions and rules which we will need to look into before providing a full assessment.

“Freezes on small business rates and reductions for the hospitality and leisure sectors are something the Chambers of Commerce lobbied hard for, and are welcome.  The infrastructure investment plans appear sensible, well thought out and achievable rather than just aspirational.  The reduction in draft alcohol duty is welcome news for pubs.

“Changes to inheritance tax for agricultural and business property will impact succession and tax planning for a number of small business owners, and it is important that all small business owners make sure they have a succession or exit plan in place.

“The slight of hand in all this is that a lot was made of personal allowances increasing in 2028 – it’s currently 2024.  The ongoing freeze in personal allowances until 2028 combined with the national minimum wage increases will push more tax revenues into the Treasury, and this is probably where a significant chunk of the additional tax take will over the course of this parliament will actually come from.

“The real test will be whether the government can deliver efficiently on its investment plans, makes the right decisions on capital spending, can deliver genuine reform to the planning system, and can tackle the impact of those not working and particularly not working due to long term sickness.”

Accountancy & Accounts, Economy & Jobs News, FInance, Finance and Banking

Budget 2024; Did Halloween come early? Hear the reaction from the Hazlewoods Cardiff Tax team

Tax partner Nick Haines and his team have been analysing yesterday’s announcements from Westminster. Nick states: “In the first Labour Budget for 14 years, there was much trepidation as to the level of tax increases, despite the manifesto pledge not to increase national insurance, income tax, VAT and corporation tax. As it turned out, the Chancellor, Rachel Reeves, announced measures to raise an additional £40 billion in tax per year, by the end of the five-year forecast period, which is a frightening figure, in keeping with the time of year.

 

“Due to the manifesto pledge, the Government was limited in the areas it could attack, but where they could, they most definitely did.

 

“Capital gains tax, which was always going to increase, went from the current 10% rate for basic rate taxpayers and 20% for higher and additional rate taxpayers, to 18% and 24% respectively, matching the current rates on residential property gains, which remained unaltered.

 

“There were also fears over the abolition of business asset disposal relief, although it survived at £1 million of lifetime gains, but with the rate increasing from its current 10%, to 14% from April 2025 and 18% in April 2026. The maximum benefit, therefore, from 2026 will be £60,000, as opposed to the current £100,000.

 

“Individuals who receive carried interest (mainly private equity investors), saw the rate increased from 28% to 32% from 6 April 2025, but with the intention of aligning it to income tax rates from 6 April 2026.

 

“It is well understood that capital gains tax is a ‘voluntary’ tax; if you don’t sell, you don’t pay, so it will be interesting to see if the increase in rates cause a behavioural change, with individuals holding out for a hopeful reduction at some point in the future, which would then cause a reduction to the receipts for the Exchequer.

 

“The biggest revenue raiser was the increase in employers’ national insurance, from 13.8% to 15% from 6 April 2025 and reducing the threshold at which employers pay it, from £9,100 to £5,000. Smaller businesses were given some relief by an increase in the employment allowance from £5,000 to £10,500, removing those with, potentially, up to four employees, from incurring a liability. This measure will generate an additional £20 billion per year by the end of the five-year forecast period.

 

“Whilst not a direct tax on ‘working people’, the consequence of such a measure is likely to be an impact on future salary increases, so ultimately it may well be a tax on those people Labour vowed to protect.

 

“Inheritance tax was also attacked, with business property relief and agricultural property relief limited to 100% of £1 million, with the remainder only qualifying for relief at 50%, whilst investment in AIM listed shares and other alternative markets will only be eligible for 50% relief.

 

“Whether this measure impacts the ability for family companies and farms to be passed on through the generations, without placing an undue financial pressure on the family or businesses in question, remains to be seen. Given this measure only raises £500 million, it is hardly a significant revenue raiser, but could severely hurt an important part of the UK economy.

 

“Pensions, which have been exempt from inheritance tax since April 2015, are to be brought back into the tax net from April 2027. This was the only announcement affecting pensions, whereas prior to the Budget, there was nervousness about the 25% tax free lump sum and tax relief on pension contributions, along with national insurance on employer pension contributions, so perhaps it should be considered we got off lightly.

 

“Stamp duty land tax did not escape either, with the surcharge for additional dwellings increasing from 3% to 5% in England and Northern Ireland. It will be interesting to see whether Wales will follow suit, with the additional rate for land transaction tax already at 4%.

 

“VAT on school fees from January 2025 was confirmed, as was the abolition of the non-domicile tax regime from April 2025. The concern with these measures will be the potential “for private schools to reclaim significant amounts of VAT for expenditure incurred before registration, along with the potential emigration of those impacted by the non-domicile changes. Given the policy costings indicate a peak for the non-domicile abolition of £5.9 billion in 2027/28, which then drops to £85 million by the end of the five year forecast, it would appear as though the Government is well aware of this risk.

 

Corporation tax is ‘as you were’ with the maximum 25% rate confirmed until the end of parliament, whilst the annual investment allowance and full expensing regime will both be maintained.”

 

So with revenue raised, where is it all going?

 

Bruce Black, Hazlewoods Tax Director advises “Well, firstly, the Chancellor had to plug the £22 billion black hole, which the above has certainly done, and then some. The next job was to ‘invest, invest, invest’.

 

Housing, schools, the NHS, transport, social care, local authorities; you name it, they’re investing. Furthermore, the Welsh Government will receive an additional £1.7 billion of funding as well as £25 million to keep disused coal tips safe. The Government also committed to funding for 11 new green hydrogen plants, one of which will be located in Bridgend. Some of this funding will come from the surplus generated by the tax raising measures, others through the introduction of their new ‘investment rule’ allowing them to borrow by recognising the value of the investment, as well as the cost, giving a net financial debt figure.  It wasn’t all about the spend, cost efficiency targets were to be set across the public sector to generate more to go into the pot.”

 

Nina Turner, Hazlewoods Associate Tax Director goes on to say “There is no doubt that the UK’s public services are in dire need of a boost and if the allocation of monies are spent wisely, and services are improved as a result, most will accept the tax rises as being a necessary evil.

 

For too long, however, tax rises have not resulted in improved public services.  UK taxpayers are already suffering the highest tax burden for 80 years and this is only set to increase.  Individuals and businesses are tired of not getting value for money, so whilst the Government are saying it is not a quick fix, the overwhelming desire for improvement will no doubt mean the UK public will not have an endless supply of patience before they will want to see some results.

 

Can Labour deliver, or will the increased tax cost actually result in a negative impact on the UK’s growth?  We will all be hoping they can but will continue to fear the worst.”

FInance, Finance and Banking, Pensions

UK Budget and US election hot topics at pension seminar

The impact of the upcoming UK Budget and US election on pensions and investment markets was a key focal point at Quantum Advisory’s latest event.

Finance, HR and pension professionals came together on 22 October to hear exclusive industry insights and market updates at the firm’s pension and investment breakfast seminar at the Celtic Manor Twenty Ten Clubhouse.

Dan Redwood, a senior investment consultant and actuary at Quantum Advisory, opened the event with an overview of macroeconomics, gilts and equity markets in Q3 and considerations for investors amid the changeable global political landscape. Dan identified four short to medium term risks for markets including political risk, a hard landing following growth, equity markets and the potential for global conflicts to escalate.

Dan said: “Elections and the direction of government policy could disrupt markets. Ahead of the Budget, the chancellor has said that growth is the challenge and investment is the solution. The chancellor has three levers to try and achieve this while balancing the books: through tax rises, more borrowing and spending cuts, all of which seem likely. Fiscal rules may have to be changed to accomplish this goal and the country’s fiscal position is likely to get worse before it gets better.

“Meanwhile, the outcome of the US election will define its economic agenda. Trump’s plans include tariffs on imports, tax cuts and spending on immigration control, while Harris’ proposals feature increased spending on healthcare, childcare and housing in addition to tax increases focused on the wealthy. The plans of both candidates are set to increase the national ten-year debt and their ability to enact policy will depend on the balance of power in the Senate and Congress.”

James Bird, a consultant at Quantum Advisory, also touched upon the pension measures speculated to appear in the Budget such as tax relief, a reduction in the amount that can be taken as a tax-free lump sum, the introduction of national insurance on employer contributions to workplace pensions and the introduction of tax on some death benefits.

James said: “The government is continuing to explore reforms to help workplace pension schemes take advantage of consolidation and scale to give better value for members and boost growth, but there could be painful rises in taxes in the Budget next week to help fund the reported ‘black hole’ in the UK’s finances.

“In addition to exploring new options such as collective defined contribution schemes which have recently been introduced in the UK and reviewing pension outcomes, another exciting development in the pensions landscape is the new defined benefit funding code of practice. Fast track and bespoke approaches to scheme journey plans and strategies are valid in the new code as long as they can be justified to the Pension’s Regulator.”

Joining the two speakers from Quantum Advisory was Lawrence Davies, the Wales partnership manager at the Money and Pensions Service (MaPS), who provided an update on how MaPS can support employers.

As an arm’s-length-body, sponsored by the Department for Work and Pensions, MaPS’ vision is “everyone making the most of their money and pensions”.

Alongside its core five functions – pensions guidance, money guidance, debt advice commissioning, consumer protection and strategy – MaPS also coordinates the UK Strategy for Financial Wellbeing, working with partners and stakeholders to help everyone find a way forward and build a better financial future.

For further information and to keep up to date with Quantum’s latest events, visit https://quantumadvisory.co.uk/.

News, Property News

State of the market –the residential property sector and the COVID pandemic

The economy and the property sector are inextricably linked. Buyer-behaviour, investor appetite and lender/landlord confidence are most commonly examined and referenced when there is significant damage to or speculation about the economy.

Interest rates are at a record low, demand for housing is high and the press have been reporting a rebound in the market due to ‘pent up demand’ from the UK population who have been in lockdown for the last 14 weeks. Rishi Sunak has announced a temporary raise of Stamp Duty to £500,000 until March 2021 to boost the property market and help buyers struggling because of the coronavirus crisis.

We spoke to a selection of property professionals from Oxford and London to ask about their experiences since lockdown easing measures have started to be announced and their projections for the future of the market.

The residential property market opened its doors again on 12 May after six and a half weeks of restrictions which included a ban on viewings and valuations. Zoopla, who provide property market statistics and trends, estimate that 373,000 transactions were put on hold during this period at an estimated value of £82bn. Since lockdown easing has come into effect, house listing sites such as Rightmove are recording record amounts of visits and press reports are rife about a spike in residential sales and rentals.

Chris Dixey, Director of Sales for Oxfordshire based estate and letting agent Breckon & Breckon says that the few weeks since they opened their doors again have been ‘busier than anyone thought they would be’. Despite holding the business and client-service levels together during the lockdown by completing on sales which had already been agreed, they were apprehensive about opening again. This was not just because of the concern about the level of business that may (or may not) come through the door but, how this might be perceived by the local community and the worry that agents might be seen to be spreading the coronavirus. So far, their experience has been ‘oddly encouraging’ says Dixey although, he points out that he would be irresponsible not to be wary or have any concern about what might happen moving forward

Middleton Advisors who source prime property on behalf of clients wanting to purchase or rent have had a similar experience in that their client enquiries for June are so far quadruple what they were last year. Tom Hudson, Founder and Head of Country Business says that there are plenty of interested clients in the market and supply is starting to pick up, they have also seen sales of stock which has been on the market for some time. Tom’s clients are predominately cash-buyers, many of whom have been planning to move for a while brought their purchases forward. Although it is hard to know whether buyers are serious or are window-shopping, a long period of down-time does tend to have this effect, with decisions about moving to a new house most commonly made over the Christmas period.

Prior to the COVID-19 pandemic, Hudson predicted that there would be a rise in the country market in 2020 and he still thinks there will be an increase in prices for good quality properties. Dixey has also seen that the demand for country homes with gardens massively increase with buyers looking for ‘the kind of place that you would want to be locked down in’. Some buyers who have been looking at the same four-walls for 14 weeks have realised that their home is no longer fit-for-purpose whereas others are looking to be closer to their relatives, with family now being deemed more important than ever.

‘The home has now become more of the castle’ according to Marcus Gunn, Mortgage Advisor for Carbon FC and this has led to people revaluating their needs. In several situations, decisions have been accelerated. For example, some who would typically be city-dwellers for a few more years are now looking for their country home earlier in the property ownership life-cycle with half a mind on the fact that they will no longer need to commute due to successes achieved working from home and the notion that the physical office will forever be changed. Others have realised that they are happy in their current home having lived and worked (and in some instances schooled) in it. They are simply making some adjustments to make their working-from-home experience more comfortable, for example says Marcus ‘Log cabin sales have gone through the roof so that people can have an office in the garden’.

Carbon have seen houses going above the asking price since lockdown easing, with some clients having to put in sealed bids – often the sign of a buoyant market. Marcus is however cautious in predicting whether this will fizzle out or become a systemic change. Lenders are fearful of being over generous, some have withdrawn the 90 and 95% mortgages and there is caution over loan-to-value multiples. It is rare for banks to grant loans to those who are furloughed from employment and there is a reluctance to provide mortgages for those employed in certain sectors such as travel, leisure and hospitality. This means that the highly-regulated mortgage market in which he operates has become more complex and mortgage applications have ‘become more like a research project than ever before’. It is exceptionally cheap to borrow money for those that can afford to so those with stable jobs who are looking at the long-game are in a good position. Property owners looking to sell are also faring well as there are fewer properties on the market, so competition is high. Low interest rates have also resulted in an uptick in interest in the buy-to-let space, an area which had fallen by the wayside due to the increasing obligations on the private landlord. Like many, Marcus likens the current market to the financial crisis of 2007 ‘it is comparable in a way, but the difference is that people are still confident in property’.

Investments

Stuart Bradney who runs the property development and investment side of Carbon FC says that ‘a lot of business being done, but by fewer people’, most of his investor clients are ‘sitting on their hands’ and waiting to see how the market unfolds but those who are active are using cash and low interest rates to their advantage. Bradney believes that the Investment economic-cycle will change with private landlords looking to ‘dump’ property due to tax disadvantages and the over-regulation of the sector.

‘Any change in the economy provides opportunity in the property market as there is movement’ says Sarah Gardener, Partner and Head of Real Estate & Construction for Shaw Gibbs. This is an opportunistic time, with some being in a very strong position because they can leverage the competitive environment that Marcus and Stuart have covered. Sarah has in fact experienced more property enquiries since lockdown-easing from her clients who are looking to diversify their family wealth or income streams by investing further into the market. The stock market has taken a hit, and although the UK stock market has partially recovered, there is still a lack of confidence in some investments. This coupled with questions around sustainability of some sectors has meant that these clients are interested in generating additional income through property rentals as another layer of security should this (or another) pandemic hit the business-world or their personal finances again with force.

Although standalone property has a higher cost to entry than the investment market, it is ‘still tangible’ says Gardener and the confidence in the likely return-on-investment in bricks and mortar is still in evident. However, it remains to be seen whether the traditional yield of capital returns being higher in the South and income returns usually being higher in the North will continue. The tax on residential property has undoubtably become more stringent over the years, prior to today’s announcement on the increase in the threshold on Stamp Duty only tax change which has been announced since the COVID-19 pandemic has been the relaxation of higher rate stamp duty surcharge reclaims if a sale of a previous main residence has been prevented. ‘As a rule of thumb, any movement of property ownership has a tax consequence’ warns Sarah and therefore she urges those who are looking for property investment opportunities or to make significant changes to their existing portfolio to think about the structure of this before making any decisions in order not to incur unnecessary tax charges.

Despite the huge shock the sector has suffered as a result of the suspension of trading during the COVID-19 lockdown, these early weeks indicate that the residential property market is making a steady recovery. There is a quiet optimism amongst those in the profession and whilst press reports fuel opportunistic offers in the market, there is no evidence yet to suggest that prices are falling. Whether this is a spike as a result of an ‘collective exhale of people who were desperate to do something’ (Marcus Gunn, Carbon FC) or the sign of longer-term return to growth remains to be seen. The overarching message from those we interviewed was that it is too early to tell, six-nine months will give us a clearer indication of market stability. Meanwhile, those with cash, low Loan-to-Value assets and borrowing potential are in a strong position now to take advantage of the interests rates, competitive market and Stamp Duty holiday, perhaps stronger now than they were pre-lockdown.