Tax break for first-time workers tipped for Budget
Key Points
- BDO expects a three-year tax cut for first-time workers in the Budget
- The cut could cover income tax or employee National Insurance
- A new NIC rate on over-pension-age workers could fund it
- Banks could see corporation tax on profits rise to 31%
- The VAT registration threshold could rise to £100,000
Accounting firm BDO expects a tax cut for first-time workers in Wednesday’s (28 October) Budget. Jon Hickman, Corporate Tax Partner at BDO, said the government could cut income tax or employee National Insurance contributions for three years for people entering the workforce for the first time.
The firm tied the measure to the government’s push to reduce the number of young people not in employment, education or training, known as NEETs.
BDO said the Chancellor could pay for the tax break by charging a new, lower rate of National Insurance to people who keep working past pension age.
“If such a measure were announced, the Chancellor, who turns 67 next February, would find himself among those affected,” said Hickman.
Other Budget predictions
BDO expects the Chancellor to spare most businesses from another round of major tax rises after increases to tax, National Insurance and the minimum wage in previous Budgets. The firm said banks and energy companies face the biggest risk of higher taxes on Wednesday.
BDO believes the combined corporation tax rate on bank profits could rise from 28% to 31%, its post-pandemic high.
The firm added that oil companies could face a windfall tax on this year’s profits against the backdrop of high pump prices.
Small businesses could benefit from an increase in the VAT registration threshold from £90,000 to £100,000, according to BDO.
The firm also highlighted calls from business groups to raise the small business rates relief threshold above its current level of £12,000.
BDO said the Treasury may introduce a new capital gains tax relief for entrepreneurs who reinvest sale proceeds into a new UK business after an exit.
The firm warned that the Chancellor could pair this relief with an increase in core capital gains tax rates.
“In our view, simplifying the tax code would help support growth in every postcode,” said Hickman.
