Resolutions for 2026  

If the Chancellor were to make new year’s resolutions, what should they be?

Think beyond square one 
One recurring error made in tax policy decisions in the past 18 months has been to announce a change without considering the consequences. For example, in her first Budget Chancellor Reeves spoke about the vital importance of growth, then implemented a national insurance increase that had the immediate effect of raising revenue and the secondary effect of dampening growth.

Also announced in the 2024 Budget was a severe restriction in the inheritance tax agricultural and business property reliefs. It was immediately obvious that there would be no way for most farms to pay the resulting tax, because the value of farms is disproportionately high in relation to their profit-making potential. However, it took 14 months for the government to recognise this. Raising the threshold from £1 million to £5 million will not be much help to erstwhile recipients of 100% business property relief but that argument is one for the future. Suffice it to say that all of this should have been thought through before the policy was introduced and then defended with grim determination (until it wasn’t). 

There is nothing edifying to say about the kite-flying that took place before the 2025 Budget. The impression given was that policy-makers had no idea whether any of their ideas were good ones, so they put them out to the court of public opinion to be torn down one by one. Why were the flaws in all of these ideas not apparent to the “experts” who were advising the Chancellor? Perhaps because nobody thinks beyond square one. 

Justify MTD for income tax 
MTD for income tax will limp forward through 2025, with nobody obligated to make quarterly returns and few people convinced of the worth of this project. The major flaw is that nobody in authority has explained in convincing fashion why MTD is being forced on an unwilling community of taxpayers. Justifications have been offered, scoffed at and then replaced by equally flimsy new explanations. If nobody can tell us why it’s happening, maybe it shouldn’t.

Sort out VAT on food 
We have brought various silly VAT and food stories to readers’ attention since this blog started (flapjacks, marshmallows and chocolate-filled/covered biscuits spring immediately to mind). They all illustrate the inadequacies of the legislation and without an underlying philosophy, it’s hard to see a way forward that isn’t arbitrary and unfair. The Chancellor might usefully decide on a workable policy, then simplify the legislation in line with that thinking. Or, better still, remove zero-rating altogether. It has been shown to be regressive and so its sole justification is flawed.