At lunchtime today, Chancellor Philip Hammond will reveal the contents of his Spring Statement 2019, providing an update on the UK’s economic health – sandwiched between this week’s meaningful votes in the House of Commons on the UK’s impending exit from the European Union (EU).
Although a plethora of Government departments have had their attentions focused solely on the UK leaving the EU, the Chancellor has been weighing up his fiscal options since last month’s revelation that January 2019 gave the Government its largest monthly surplus in public finances since records began in 1993.
The Office for Budget Responsibility (OBR) labelled the 2018 Autumn Budget as “the largest discretionary fiscal loosening at any fiscal event” since 2010.
This, combined with indications that the UK’s deficit reduction programme is putting the Government on track to operate with a surplus, means that Mr Hammond may look to continue the theme from his 2018 Budget speech, during which he declared the end of austerity.
How is the Spring Statement 2019 likely to affect the UK’s army of small business owners and self-employed professionals?
2019 economic outlook
Many reports suggest that the OBR will confirm an about-turn from October when it raised its GDP growth forecast for 2019 to 1.6%.
It is thought that this figure could be revised down to 1.2%, in line with levels forecast by the Bank of England.
Making Tax Digital
With the introduction of the Making Tax Digital (MTD) for VAT looming large on 1st April 2019, we can also expect an update from the Chancellor on the preparation of both HM Revenue and Customs (HMRC) and businesses to handle the new digital tax reporting requirements.
Private sector IR35
Mr Hammond may provide some further clarity about how IR35 may possibly be applied for private sector contractors.
The Government has launched a consultation into how it may extend off-payroll working rules for the private sector from April 2020. The Chancellor could look to go into more detail on these plans which are designed so private sector contractors will have to pay income tax or national insurance contributions.
Buy-to-let property market
The UK’s housing market is almost certain to be part of the Chancellor’s fiscal update. No substantial changes to property rules are anticipated in the Spring Statement 2019, but Mr Hammond may have to rethink the recent removal of tax reliefs for buy-to-let private landlords which has seen a decline in the number of smaller operating landlords.
According to the Royal Institution of Chartered Surveyors (RICS), the scrapping of these tax reliefs led to a fall in the supply of rental accommodation nationwide.
Hew Edgar, of RICS, said: “With demand continuing to grow, there are unsurprisingly renewed signs rents are edging upwards again, putting increasing pressure on tenants.
“As affordability to buy remains stretched in many parts of the country this is making life difficult for a growing number of people.”
It is quite possible that the Chancellor may be forced to introduce capital gains tax exemptions for landlords that sell on properties to first-time buyers, or policy measures to encourage more build-to-rent properties.
The prospect of an emergency budget this summer
The Chancellor may also touch upon plans for an emergency summer budget if the UK leaves the EU in a no-deal scenario.