United Kingdom: Tax rises and temporary relief – Deutsche Bank

Deutsche Bank anticipates around 25–30 policy measures in the Autumn Budget, with modest consolidation and backloaded tax increases. A higher bank surcharge, online marketplace VAT collection and dividend tax hikes are expected to lift receipts by about GBP 4bn by 2031/32. Temporary cost of living and business support will front-load spending, keeping net expenditure only slightly higher than Spring projections.

Tax, spending and consolidation path

"In short, we expect a modest amount of fiscal consolidation measures, amounting to GBP 6bn in 2029/30 (and reaching GBP 7.5bn by 2031/32) to offset slightly higher spending (GBP ~3bn in 2031/32). Big decisions on spending envelopes will likely be delayed, alongside higher defence spending and the Government’s key economic initiatives (such as the National Social Care service)."

"We expect near 20 policy measures on receipts to be announced at the Autumn Budget. In total, we expect temporary discounts on taxes to pull receipts lower (particularly in 2026/27 and 2027/28), before adding to the Chancellor’s coffers from 2028/29. By the end of the OBR’s forecast horizon, we expect tax receipts to raise an additional GBP 4.3bn."

"On the flip side, we see some giveaways – particularly as it relates to the cost of living and cost of doing business. Here, we think discounts on business rates for hospitality and other exposed sectors are a given – alongside an increase in threshold for small business rates relief (from GBP 12k to 18k). We also expect the Chancellor to cancel the Climate Change Levy indexation. And as already reported, we expect the Chancellor to exempt low-income pensioners out of income tax."

"In terms of total managed expenditure, we expect net spending to increase only in the first two fiscal years (by just around GBP 1bn) before turning broadly neutral through the back of the forecast horizon. This would see total managed expenditure pick up to just around GBP 1,700bn by 2031/32 – around GBP 30bn higher than projected in the Spring Statement."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)