It is a Budget under intense scrutiny as the Treasury looks to prioritise renewal and growth, all while clear manifesto commitments, self-imposed fiscal rules and a much-discussed black hole weigh heavily on its decisions.
As a result, it seems increasingly likely that the strategy of more targeted increases and cuts will have to make way for more heavy-duty changes – particularly around headline taxes. While an abandoned income tax rise may now look like manufactured relief, the Budget is likely to have significant implications for all, whether it’s homebuyers, savers, pensioners or the wealthy.
John Phillips, CEO of Just Mortgages and Spicerhaart, said: “We cannot overlook the real prospect of tax rises and broken manifesto promises, with the groundwork already laid by the Chancellor. It’s a difficult balance – do they keep their promise and keep pecking around the edges or take the hit of increasing something like income tax now, in the hopes that it pays off before the next election?”
Holding patterns in housing
A particularly late Budget has undoubtedly created some uncertainty across the housing market, as both buyers and movers wait to see what is announced. Rumours have been circulating of changes to stamp duty and the introduction of a new property tax.
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Phillips continued: “If they do intend to take with one hand, they really need to give with the other, and the housing market is a great place to do that – particularly given its critical role in the wider economy. While scrapping stamp duty would be ideal, we know this isn’t realistic in the current climate. My hope is that a replacement property tax isn’t too restrictive, particularly when it comes to limiting downsizers, who are integral to the broader success of the market.
“What we need right now is multiple pathways into homeownership. I’d like to see the Chancellor be bold and throw her support behind affordable, low-deposit housing – in particular, shared ownership. I think Pepper Money’s recent white paper offers some great policy points to increase access to the scheme and enable it to support the government’s social mobility agenda. Things like increasing the income thresholds just make sense in this climate, as does encouraging providers to recognise the increasing role of specialist lenders and embrace these applications.”
Richard Pike, chief sales and marketing officer at Phoebus Software, joined calls for greater support.
Pike said: “We would like to see more targeted support for first-time buyers, helping them onto the housing ladder, as well as tax incentives for moving up the housing chain. The announcement of such measures, alongside a highly likely base rate cut in December, will be a huge shot in the arm for the market.
“I would also urge Rachel Reeves to encourage economic growth by incentivising entrepreneurs with tax breaks rather than increasing capital gains tax. We need to give landlords some respite – many buy-to-let properties are becoming less profitable, as landlords face higher regulatory costs, putting pressure on a private rental sector that is already strained, when in fact more housing is required. I would like to see tax incentives to support the BTL market, but this is highly unlikely.”
Threat to vulnerability
As well as those just off the high street, specialist lending has long provided a lifeline to those with more complex circumstances who do not suit traditional or mainstream lending criteria.
Andrew Gething, managing director of vulnerability specialist MorganAsh, argued that raising the tax burden will increase the financial pressures facing households and could push more adults into financial difficulty and vulnerability.
Gething said: “Firms across financial services need to know who these customers are, what support they need and what outcomes they are receiving.
“New guidance will land just prior to the Budget from the Chartered Insurance Institute (CII) that will set out the expectations for financial services firms when it comes to systems, data infrastructure and reporting to properly support vulnerable customers and meet the requirements of Consumer Duty.
“Much of the government’s focus so far has been on agile regulation – cutting red tape and driving efficiencies to deliver growth. It would be great to see government support to help firms adopt and embed these systems and standards. That could mean expanding R&D tax relief, or other funding and incentives, to help firms invest in compliance technology. That way, we can improve standards, protect those most at risk – and, importantly, help firms unlock the competitive advantage of knowing their customers better, adapting their products and services, and delivering better outcomes.”
Economic engine room
Despite a full range of tax rises levied in last year’s Budget, it’s likely that businesses are also vulnerable to the Chancellor’s crosshairs. Gary Thompson, sales director at SME funding provider Asset Advantage, said there is much apprehension ahead of the upcoming Budget.
Thompson said: “The government has long said that economic growth is its number one mission. Key to delivering this is giving UK SMEs the platform to grow, expand and succeed.
“We would like to see the upcoming Budget recognise the role of SMEs as the engine room of the UK economy. Rather than stifle, we need to enable these businesses to contribute to the growth agenda by providing targeted relief – either through business rates or employment costs. This will not only help to alleviate pressure on margins and stabilise cash flow, it will also encourage expansion and investment, and increase the viability of these businesses to access suitable funding.
“SMEs need faster, fairer and more accessible funding routes. The commercial brokers and businesses we speak to every day aren’t looking for subsidies, they’re looking for smart, commercially minded finance partners who understand non-standard assets, new-start ventures and business acquisitions. The Budget should recognise that the UK’s growth won’t come from the usual sources, it will come from giving ambitious SMEs the confidence to invest, expand and hire. That requires lower taxes and employment costs, and a funding landscape that moves at the pace of business, not bureaucracy.”
As Wednesday’s Budget looms, every corner of the housing market and wider economy is braced for decisions that will shape activity, investment and confidence in the coming year.
The picture is no doubt complex and will likely force the Chancellor to move away from incremental adjustments to bold action.
Either way, it’s clear that clarity, targeted support and a clear path to growth are urgently required.
