Tax cuts should increase consumers’ disposable income
By reversing April’s 1.25% increase in National Insurance payments from 6 November, consumers should have more money in their pockets to spend on holidays ahead of the peaks booking season at the turn of the year. The recently announced cap on household energy costs should also help to give consumers more confidence about their finances.
Julia Lo Bue-Said, chief executive of Advantage Travel Partnership said: “Any measures that ease the financial strain on consumers, such as the energy freeze caps and tax cuts, is positive news for our industry as it will give consumers more disposable income.”
From April 2023, the government will reduce the basic rate of income tax from 20% to 19%, which should further boost consumers’ post-tax income. The luxury holiday market may also benefit from the abolition of the 45% higher rate of tax for those earning more than £150,000 per year.
Travel businesses are set to save money too
The removal of the increase in National Insurance Contributions will help travel firms as well as individual employees. While the planned increase in corporation tax is also being ditched – previous chancellor Rishi Sunak had intended to raise corporation tax from 19% to 25% in April 2023.
Luke Petherbridge, Abta’s director of public affairs, said the government’s plans did “include some savings for business” and came on the back of the scheme to help companies reduce their energy bills, which was announced earlier this week.
“However, the government could have gone much further with plans to support businesses beyond the current financial year, which would have benefited our members,” added Petherbridge.
“We strongly urge the government to take the opportunity to use the full budget statement to extend business rates relief support beyond April 2023, and to look at how government could work with the banks to ease the pressure of Covid loan repayments.”
The government is also set to repeal IR35 off-payroll rules which affect self-employed workers operating through a company from April 2023.
Return of VAT-free shopping will boost inbound tourism
Kwarteng also announced plans to reintroduce VAT-free shopping for international tourists, which should help to further drive inbound international traffic to the UK post-pandemic.
Joss Croft, chief executive of inbound travel association UKinbound, said “We are incredibly pleased that government has listened to the tourism and retail industries and will be introducing a modern, digital VAT-free shopping scheme.
“This is a significant win for Britain PLC that will drive growth, provide a boost to high streets across the country, and lay the groundwork for the UK to become an international shopping hub, driving tourism and export earnings into the UK.”
