For individual’s the backdrop to this Budget was increasing inflation and an increase in interest rates with the impact being that living costs are increasing quicker than earnings.
Early in the Budget speech the Chancellor downgraded the UK’s growth forecasts over the coming years. On hearing this I expected there to be some announcements of tax increases. However, Philip Hammond increased the personal allowance and the basic rate tax band. This means that individuals can now have earnings of £46,350 before paying income tax at 40%. This is an increase of £1,350.
There was also speculation that the VAT registration threshold would be reduced. Businesses are obliged to register for VAT where turnover exceeds £85,000 for the previous 12 months. However, the Chancellor announced that the VAT registration threshold will remain at £85,000 for the next 2 years. This is good news for businesses who avoid the dilemma of whether to pass on the cost of VAT to customers as well as avoiding the administrative burden of quarterly VAT Returns. This is also good news for consumers who are experiencing a drop in disposable income.
Despite some positive measures being introduced, the likelihood is that the squeeze on people’s living standards will continue for some time.