2 stocks on my radar following the UK Budget

As the UK government announces £40bn in tax increases, Stephen Wright is looking at the implications for two stocks he’s been watching over the last year.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Rachel Reeves has just announced £40bn in tax increases, many of which are coming from businesses. But what does this mean for UK stocks?

The answer will vary from one company to another. But there are a couple of FTSE 100 and FTSE 250 firms that I think are particularly interesting.

BP

Windfall taxes are a constant risk with BP (LSE:BP shares). And the big news is that this is set to rise to 38%, bringing overall taxation to 78% on hydrocarbon exploration and production. 

Should you invest £1,000 in Experian Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Experian Plc made the list?

See the 6 stocks

The government is also withdrawing the 29% oil and gas investment allowance. While the decarbonisation allowance is unchanged, BP has shifted its focus away from this area recently.

Worse yet, the firm is likely to face windfall taxes even with oil prices falling. The mechanism for resetting taxes back to 40% only applies if oil falls below $71.70 and gas goes below £0.54.

While oil is close to this level, gas is nowhere near. So BP could find itself having to pay higher taxes while also seeing its revenues reduced by oil prices that aren’t particularly high.

UK natural gas prices

Source: Trading Economics

One way or another, the company is likely to have to pay more in windfall taxes, which will mean profits will be lower than they would have been. But there is a potential upside.

With the tax incentive withdrawn, BP might pull back on its investments. In that situation, the company might decide to return cash to shareholders instead – making the dividend potentially interesting.

J.D. Wetherspoon

For J.D. Wetherspoon (LSE:JDW), things could have been worse. While costs are likely to go up, there was also good news for the company. 

Created with Highcharts 11.4.3J D Wetherspoon Plc PriceZoom1M3M6MYTD1Y5Y10YALL30 Oct 201930 Oct 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

The big challenges will come from increased National Insurance contributions from employers and a higher National Minimum Wage. That is something the firm will have to deal with. 

On the other hand, though, the Chancellor announced a cut to duty on draught alcohol. That’s an unexpected boost for the pub industry as a whole. 

This gives J.D. Wetherspoon a choice. It can either use the cut to offset higher costs, or it can pass it on to customers and look to widen the gap between its prices and those of its rivals.

The other positive news was an extension to the business rates relief the hospitality industry has been benefiting from since Covid-19. This should also help the firm’s bottom line. 

Overall, the Budget was better than I expected for J.D. Wetherspoon. And the stock has jumped 5% as a result.

Tough times ahead?

Before today’s announcement, it was widely understood that taxes were going to go up. And businesses were likely to be major contributors.

The latest announcement gives UK investors a clear sense of what the tax environment will look like over the next few years. So the next question is which stocks to buy.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Stephen Wright has positions in J D Wetherspoon Plc. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Investing Articles

Here’s the dividend forecast for Rolls-Royce shares as Trump rocks the markets

Rolls-Royce shares have joined in the volatility over the past week. However, with the direction being largely downwards, the dividend…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Dividend yields of up to 11%! Here are 3 UK passive income stocks to consider

Searching for ways to supercharge your passive income with UK dividend stocks? Here are three that have grabbed our writer's…

Read more »

Young Caucasian woman at the street withdrawing money at the ATM
Investing Articles

£10,000 invested in NatWest shares at the start of 2025 is now worth…

NatWest shares surged into 2025, but things have become a little more complicated in recent weeks. Dr James Fox explores.

Read more »

Investing For Beginners

Why the FTSE 250 could outperform the FTSE 100 for the rest of the year

Jon Smith explains why the FTSE 250 could do better than its big brother when factoring in domestic exposure and…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Tariff fears send the Lloyds share price tumbling, but the dividend yield is climbing

Just when the Lloyds Banking Group share price had been rising steadily, along comes a global upheaval to knock it…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

Here’s how a stock market crash could help an investor retire years early

A stock market crash can be alarming -- but for the well-prepared investor, it can also be an exceptional opportunity…

Read more »

Investing Articles

1 key fact to remember in this stock market correction

This writer takes a look at a FTSE 100 investment trust that is catching his eye after the recent massive…

Read more »

Investing Articles

I was wrong about the Tesla stock price!

Tesla stock's been affected more than most by ‘Liberation Day’. But our writer has other concerns about Elon Musk’s company.

Read more »