The cost of the Budget is going to be borne by businesses, in particular private businesses, who may change their behaviour in response, according to the guests on this week's podcast.
Speaking on the latest edition of the FT Adviser podcast, Caroline Le Jeune, private client tax partner at RSM UK and Claire Trott, divisional director for retirement and holistic planning at SJP, unpacked Labour’s first budget in 14 years.
Described as “long” and “targeted” by Trott and Le Jeune, the pair delved into the £40bn worth of tax hikes made by Rachel Reeves, in an attempt to plug the £22bn black hole in public finances.
Le Jeune said: “The first impression that I have is the cost of the Budget is going to be very much borne by businesses, particularly private businesses, which is a limited resource on which to call.”
Trott agreed, adding: “There's definitely a focus here on businesses being impacted by these changes. There are obviously some personal things.
“My world is pensions, and the addition of the IHT to pensions rules, and what that includes and doesn't include, is interesting, but we have time and a consultation, and I think the consultation itself will be challenged quite strongly by the industry and by some individuals.”
Behavioural change
Le Jeune and Trott discussed how Labour had not factored in behavioural change when looking at the money the government plans to make from the policies set out in the Budget.
“So I work with a lot of individuals who do a lot of planning, and every time there is a change like this, they will change their behaviour. They'll change what their business plans are. They'll change who they're employing, or even which country they're doing it in.
“I noticed in the Budget commentary there is a change to the carried interest taxation for private equity executives. Obviously, that only impacts a small number of people in the UK. However, they are a number of people who contribute hugely to the economy of this country.
“And with the changes being introduced, the move from taxing carried interest at 28 per cent to 32 per cent and then actually to income tax rates when you go into the detail of the Budget, is really going to drive a lot of these individuals to completely relocate their businesses outside the UK,” Le Jeune explained.
Trott noted how the changes may impact advisers and their businesses and the behavioural changes that may occur.
She said: “It will depend on the structure of business, how are adviser businesses set up? What's the best way for them to function? Is this going to drive people from going towards being that limited company to staying as a one-man band, and the different risks that brings with it for their clients and for themselves?