Following a heavily trailed Autumn Budget, and a leaked OBR report on the day of the announcement, ACCA has reacted to the key Budget announcements that affect the UK economy, businesses and the accountancy profession.

After all the leaks, U turns and speculation came a wide range of new policies, changes and amendments, which ensures the Chancellor Rachel Reeves could claim she stuck to her election promise of no tax rises on working people. However, that has not stopped the Chancellor from introducing a multitude of piecemeal tax changes that add up into a significant increase in the tax take. 

As well as the revenue implications, piecemeal changes add to the UK’s already highly complex tax system - something Glenn Collins, Head of Technical and Strategic Engagement discussed: ‘For a long time, often well-intentioned changes have been made to the UK’s tax system on a piecemeal basis many times over, leaving us with a hopelessly complex framework, prone to mistakes, misinterpretation, and abuse. 

‘Even the OBR says its forecast is hampered by an array of complex tax changes made in this Budget – so the complexity is set to get worse.  

‘This creates unnecessary extra burdens for HMRC, through the numerous, small-scale errors made by taxpayers that require compliance activity. More critically, this does not create the right fiscal environment for growth.  

Jason Piper, head of tax and business law, said: ‘The announcement of further powers for HMRC to crack down on tax avoidance schemes should be a positive step forward to combatting fraud and abuse of the tax system. We and other stakeholders have been pleased to engage with HMRC trying to design these so that they work as well as possible and without unintended side effects. However, getting the measures right takes time and effort, and must go hand in hand with dedicated investment in HMRC upskilling and investment in its software.’

Piper added: ‘The extension of thresholds being frozen until 2030, which otherwise would have increased in line with inflation, exacerbated by recent measures such as the clawing-back of liability arising from winter fuel payments, will increasingly bring previously non-taxpaying individuals into scope of the tax system.  

‘Refusing to increase the thresholds in line with inflation not only hurts the more vulnerable in our society, but it also offers little value to the Exchequer with a huge amount of time, effort and resource needed to implement and tax.’

One measure the Chancellor introduced is to put National Insurance Contributions (NICs) on salary sacrifice pension contributions. As a way of increasing taxable income without raising taxes directly, it enables the Chancellor to not break manifesto promises, while generating more revenue. Yogesh Dhanak, Senior Technical Advisory Manager said: ‘Salary-sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from NICs from April 2029 and therefore be subject to both employer and employee NICs.  

‘This demotivates employees from maximising their pension savings and preparing for the future as it taxes them further whilst increasing the cost to employers at a time when they have already been burdened with higher costs of doing business. The employment rates in the UK reflected this in October, as employers have struggled to grow and scale while fighting against rising costs.  

In further education news, funding changes were announced to support smaller businesses in England. Gemma Gathercole, Strategic Engagement Lead for England, said: ‘ACCA welcomes the announcement of changes to apprenticeship funding in England to training free for Under 25s in small and medium size enterprises. This is an important step to supporting SMEs to take on younger employees.  

‘However, the removal of Level 7 funding for those over 21 limits the potential impact of this change both for businesses and for individuals looking to undertake a profession.  ‘At a time when the skills gap is widening, and there is pressure to ensure there are enough highly skilled jobs available in the economy, reducing the training access and increasing the pressure on businesses to deliver this seems backwards.’  

 Discussing the impact of the fiscal changes is Jonathan Ashworth, Chief Economist: ‘Large tax rises were announced, as the Chancellor attempted to boost the headroom against her main fiscal rule. It is now meaningfully larger than expected, but the OBR noted that it is still small compared with the uncertainty around its forecasts and the impact of the many tax changes announced. Meanwhile, the OBR became more pessimistic on future GDP growth prospects and now expects inflation to return to the Bank of England’s target in 2027, a year later than previously forecast’  

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