Chancellor’s policies mean people will feel the cost-of-living burden

Winnie Cao, Partner said:

The Chancellor argues that individuals are now better off by £1k per year. However, the fiscal drag caused by the freezing of personal allowances, rate bands and thresholds until April 2030 combined with some potential inflation in the short term means that people will feel the burden of cost of living.

On the other hand, the increase in tax intake should translate to the deployment of funds in the right channels for quality of life, as well as growth that will eventually lead to income increase.

The Chancellor talked about investing in the infrastructure. The UK’s infrastructure is lagging behind compared with other economies, e.g. Singapore and Japan. The infrastructure issues need to be fixed as soon as possible to enhance the UK as a place to invest, live and do business in.

The government is right in deploying more funds in the defence sector due to the changing international environment. However, it should also consider introducing more beneficial tax and social security schemes for veterans, so those who worked for the Army, Navy and Air Force enjoy the relevant fiscal benefits following their service, and employers can be rewarded for employing them.

Making the UK an attractive destination for overseas investment is important. Given the recent conflicts, the UK have proved itself as a stable jurisdiction legally and politically for international businesses to set up and operate in. It should promote its unique position as a ‘business haven’ and carefully balance its role amongst major countries.

To enhance growth, Rachel Reeves should consider lowering the Corporation Tax rate. It only makes 8% of the governmental revenue intake, but a headline rate of 20% (as opposed to the current 25%) will set us apart from other G20 countries and become an immediate appealing factor.

While in the last 18 months, the FCA have simplified criteria for companies to list on the London Stock Exchange. Recently, it has also been announced that they will accept Chinese accounting and audit standard, encouraging companies in the second largest economy to participate in the London stock exchange.

The UK has world leading higher education institutions, which in the last year have been struggling financially. If the UK wants to benefit from the talents and soft power reach of the higher education, the Government need to think about the relevant attraction for overseas students. Currently, the Post Study Work visa will shortly be reduced to 18 months, and the cost of work visa is extremely high. The new immigration whitepaper rules should encourage high earners to stay in the UK. And the government should reduce the cost for employers to hire overseas talents.

Winnie concluded:

Entrepreneurs are the drivers for economic and innovative growth. Unfortunately, we experienced some exodus of entrepreneurs in the last 24 months following the announcement of FIG regime, as well as introducing the cap of Business Property Relief for Inheritance Tax. Many of them have relocated their businesses to Dubai. With the latest international geopolitical situation, we may see some repatriation. However, to fully revert the negative impact experienced by the entrepreneur community, we should seriously consider increasing the Business Asset Disposal Relief back to the £10 million mark as the pre-March 2020 standard, and setting a 10% CGT tax rate.

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