How might the UK Autumn Budget affect our favourite FTSE 100 shares?

I hold two popular UK companies in my Stocks and Shares ISA that have featured in Autumn Budget speculation in the past couple of weeks.

They could both be affected, one positively and one negatively. But in both cases, I won’t let it distract me from the one thing that matters above all else — the fundamental strengths and weaknesses of the companies themselves.

Hit on banks?

The first is Lloyds Banking Group (LSE: LLOY), along with the rest of the UK banking sector. And the risk is a windfall tax on bank profits. Rumours of such a move emerged some time ago, though it looked like Chancellor Rachel Reeves had pulled away from the idea.

But in recent weeks the idea resurfaced as an alternative to raising income taxes. The banks benefitted when taxpayers’ money bailed them out in the financial crisis. And the high interest rates of recent years have boosted their net interest margins while hitting borrowers’ pockets. Lloyds in particular, as the UK’s biggest mortgage lender, has enjoyed healthy interest income.

So taking a slice off the top of their windfall profits is only fair, right? I can see that as a powerful political argument. Analysts suggest it could take the form of a one-off levy, or an increase in the 3% corporation tax surcharge already imposed on banks.

The Chancellor, however, has also suggested she doesn’t want to damage financial sector competitiveness.

But if it happens, it’s almost certain to reduce reported profits. And I could see a Lloyds share price dip as a result. But if it’s genuinely a one-off, I don’t see it making any real long-term difference. I’m holding.

Boost for builders?

I also have Persimmon (LSE: PSN) in my Stocks and Shares ISA. And might the Autumn Budget ease stamp duty? There’s even talk of replacing it completely, by property tax on homes worth more than £500,000.

Such a move could mean a boost in the low-to-medium price bracket. And that’s pretty much where Persimmon lands. In its third-quarter update on 13 November, the company reported an average forward selling price of approximately £295,000. We might just see an uptick in demand for new homes in Persimmon’s price range.

The housing market is strongly restrained by a shortage of supply. And that means prices will tend to rise to whatever buyers can afford. And history shows changes in taxation in a market like this can be quickly balanced by changes in prices. So maybe the real long-term beneficiaries will be the builders themselves, with the potential for better margins?

Other taxation changes might have adverse effects on housing affordability. And the Persimmon share price could even dip in the short term if stamp duty doesn’t change, and investors are disappointed.

But this is another hold for me. No UK Budget has ever changed the way I invest, and I doubt one ever will.

The post How might the UK Autumn Budget affect our favourite FTSE 100 shares? appeared first on The Motley Fool UK.

More reading

• 3 FTSE 100 value stocks I’ll be watching like a hawk during the Budget
• Do Rolls-Royce or Lloyds shares offer the better value?
• Should Lloyds shareholders consider taking profits after a 142% gain?
• Plenty of stocks are forecast to grow faster than the Rolls-Royce share price. Here are just 3
• £10,000 invested in Lloyds shares 5 years ago is now worth £24,600! What’s next?

Alan Oscroft has positions in Lloyds Banking Group Plc and Persimmon Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

See author's posts