The Budget 2021, which is now only two weeks away, is likely to be the most interesting for quite some while.
Mr Sunak has a monumentally difficult balancing act – a huge budget deficit and a weak economy in need of care and attention.
Might we see a light touch in March with the more challenging tax increases left for a second Budget in the Autumn perhaps?!
What I hope to see in the Budget 2021:
- No immediate changes to Capital Gains Tax for entrepreneurs;
- An extension of the Stamp Duty Land Tax reduced tax rates; and
- An announcement that the harmonisation of Income Tax and National Insurance is to be progressed.
What I suspect we will see:
No increase in the rates of income tax although we might see the freezing of allowances and bands. The Chancellor must be careful here as he has manifesto pledges to consider.
Mr Sunak has highlighted the fact that the NIC rules are not consistent across all earners. Might he announce measures to address this? We have the new IR35 reforms coming in to force in April which is a clampdown on freelance workers.
I think it highly likely that he will announce an increase in the rate of corporation tax. At 19% this is acknowledged as one of the lowest corporate rates amongst major tax jurisdictions. One concern is how might any increase stifle the recovery which all are hoping will materialise once restrictions are eased. Mr Sunak will want to ensure that the UK economy remains competitive with other major economies, but he still may believe that there is scope for an immediate increase.
Capital Gains Tax is at the top of many lists for a change following the OTS reports before Christmas. There are several issues which he could address: rates, allowances, and relief for business owners. Care is needed – the tax take could reduce if he is too aggressive – the tax on material capital gains can often be avoided with proactive planning.
There are certain businesses which have done well in the pandemic – online retailers and the like. Might the Chancellor make changes – one off taxes, VAT changes etc. to try to reduce the advantage they have over traditional retailers?!
Then there are the perennial topics which appear before every Budget:
- Beer, cigarettes, and fuel duty;
- Inheritance Tax simplification;
- Pension contribution tax relief; and
- Second home owners.