Spring Budget 2021 Series – one of the most important budgets in history?

Spring Budget 2021 Series – one of the most important budgets in history?

 

Prediction from the market with Liz Wilson, Partner, Taylor Wessing

 

It would not be an exaggeration to say that this is one of the most important budgets that a British Chancellor has ever had to deliver.  The economic cost of Brexit and the coronavirus (Covid-19) global pandemic is a challenge like no other.  The UK has not seen the landslide of companies going into insolvency that many other countries have due in no small part to its support package but that has been expensive.  Businesses and individuals alike are braced for the worst but hoping for the best.  The optimist would note that the amazing progress in the mass vaccination scheme and the pent-up spending power that will hopefully soon be unleashed may help us to trade out of the current economic situation without seismic tax changes. 

 

Against that backdrop, my predictions might be wholly misconceived, but I will give it a go anyway!  I predict the following:

  1. An increase in the rate of taxation of dividends for individuals who are participators in close companies: the delicate balance of respecting the choice of businesses as to whether to incorporate or not whilst ensuring that there is no tax incentive or inhibition to doing so is not one that has yet been resolved. 
  2. An increase in the rate of National Insurance contributions for the self-employed including professionals organised as limited liability partnerships must be tempting, notwithstanding the election promises not to increase national insurance contributions.  A new "NHS support" levy charged on higher earners might be introduced.
  3. An extension of the apprenticeship levy and a targeted approach to encouraging businesses to employ the youth unemployed
  4. An increase in VAT rates overall but making permanent the temporary reduction in the rates that apply to the hospitality industry of 5% that would otherwise expire on 31 March 2021.  The Chancellor will want to take advantage of the pent-up spending power for those lucky enough to have been able to save during the lockdowns. 
  5. A review of research and development tax relief.  This relief has been of huge benefit to many companies but there are some aspects of it that would warrant a more detailed reconsideration.
  6. No change to corporation tax other than for property-rich closely held companies.   

We have already had (in January 2021) the next stage in HM Treasury's review of the UK's funds regime.  The call for input closes on 20 April 2021 so I would anticipate that the Government will wait for the outcome of that report before announcing changes to the UK funds rules. 

I am hopeful that there will not be a wealth tax and that, if there is to be a change to the rate of capital gains tax, any increase will be deferred until a future date to encourage business owners to trade out of the current economic crisis strongly and with renewed vigour.

Interviewed by Vinothini Samugamnathan 

 

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About the author:
Liz Wilson advises on a broad spectrum of tax issues as a partner at Taylor Wessing.