Budget has long-term plans with government’s eye on next election

Today's budget announcement has all the hallmarks of a government firmly thinking about the next general election, says Paislei Godley, senior tax manager here at Prime Accountants Group.

Paislei believes that while the announcement has some good foundations which should be broadly welcomed, the benefits may not be felt for some time, posing the question of whether they will still be implemented if there is a change in government when the country next goes to the polls.

Childcare

The headline-grabber is the expansion of free childcare to 30 hours per week, however, this will only be fully-implemented by September 2025, by which time the government will have to hold a general election.

Paislei said: The expansion of free childcare is an interesting one. Encouraging people back to work is great but it is not as straightforward as that, as the infrastructure within the childcare sector isn't ready as there are not enough childminders, hence why it is a long-term plan.

Pensions

Meanwhile, keeping people in employment was also a theme to Jeremy Hunt's budget, and the announcement that the lifetime allowance on tax-free pension contributions is being scrapped, which is currently £1.07m, is good news.

There was also the welcome news that the tax-free yearly allowance for pension pots is to rise from £40,000 to £60,000.

Paislei said: Keeping people in work, rather than retiring, is being encouraged by these pension announcements, particularly abolishing the lifetime allowance on tax-free pension contributions, and we welcome them.

Corporation tax

However, for businesses there was disappointment that the government is pressing ahead with its corporation tax increase from 19 per cent to 25 per cent, although it is encouraging to see the Chancellor's announcement on full capital expensing on IT, plant and machinery for the next three years to replace the super deduction.

Paislei added: The details have yet to be seen but this announcement does provide a glimmer of hope to businesses, many of whom are still struggling to stay afloat.

Investment

There was also some positive news for 12 regions, including the West Midlands, which have been earmarked as investment zones, receiving £80 million each over the next five years, although Paislei raised the concern that, again, plans span the next general election.

Paislei's impression of the budget, from her expert tax point of view, was that it wasn't a particularly exciting one, with no major cuts in taxes being announced, and nothing being announced that they weren't expecting.

Paislei concluded: As mentioned, some of the major announcements in this budget have long-term aspirations, which begs the question of how many will actually stay the course of time.