We believe that there would be value in the government setting out a personal taxation roadmap akin to what they plan to do in support of business taxation.
The need for stability extends to our pensions framework. Speculation around changes to the taxation of pensions – something we think is unlikely at this upcoming Budget – and more specifically the pensions tax-free lump sum allowance is unhelpful.
If we are to treat this as speculation only, it can lead to bad consumer behaviour – that is, seeking to access tax-free cash before you ordinarily would.
If it is the government’s intention to row back on this allowance, we would be concerned that many savers will feel let down by government that seemingly changes the terms and conditions of the savings vehicles they have committed to over a long period of time.
Competitiveness
From a competitiveness standpoint, the UK currently compares exceptionally well to our closest international competitors. As mentioned above, direct taxation on personal wealth has remained reasonably static as a percentage of GDP and the headline rate – specifically CGT – remains low in comparison to our closest competitors.
If the government is serious about ensuring that the UK remains a destination for investment and investors to drive economic growth, it is vital that any changes made on October 30 retains this UK competitive advantage.
Practicality
Finally, and perhaps most importantly, it is the principle of practicality. Traditionally, policy changes in financial services have not necessarily been made with the operational implications of them front of mind. Structural changes to the tax framework are not impossible to make, of course, but they do need to be planned.
Most firms have development roadmaps in place to schedule a wide range of regulatory, technological and business as usual operational changes needed, and any substantial tax changes will need to fit in with these.
More broadly, more run-of-the-mill outputs like investor literature are all impacted by substantive and, in particular, overnight change. If change is coming on October 30, it is vital that firms are provided with sufficient time to understand what is required of them and to implement them.
We accept that the government thinks that it has difficult decisions to make in the Autumn Budget. We have already seen through recent initiatives, such as limiting the winter fuel allowance, that it is not afraid to make unpopular decisions.
While not exactly excited at the prospect of change, change is something we can live with, given the lack of alternatives.
But in implementing change, this government needs to ensure that the decisions they make are lasting and not subject to annual tinkering, retain our position as an attractive destination for investment and investors, and give due regard to the practical implications of any change.
