What will the Chancellor Rishi Sunak announce in the Budget on the 3rd March? There has been much speculation in recent weeks. Some of our leading authors give their predictions.
Craig Simpson – Direct Taxes
Tax Partner at Bates Weston | www.batesweston.co.uk
Author of Tolley's Tax Planning for OMBs
The Chancellor Rishi Sunak faces difficult decisions in the upcoming Budget. On the one hand there are strong arguments to raise taxes to start the process of paying for the pandemic, but there is a balance as the country cannot afford to stifle economic activity and investment. It is possible that Rishi Sunak takes an unexpected approach and not raise taxes this Budget and wait to assess the impact of the economic bounce back that should happen when the restrictions are eased.
Our predictions are:
Covid relief measures – a pathway on winding down the financial support.
CGT – Major structural changes are unlikely to be made, but an increase in the main rate of CGT to 30% could be an interim measure to move gains towards income tax rates. Business Asset Disposal Relief to remain unchanged for now. More reform in the Autumn in response to the OTS review.
Freezing of income tax personal allowances to £12,500 and the income tax thresholds. This will create fiscal drag and could see a substantial increase in tax revenues.
Increase in the main rate of Corporation Tax to 23% or the reintroduction of different rates depending on profits.
Abolish higher rate income tax relief on pension contributions, limiting relief to 20%.
Extension of the reduced rate of VAT for the hospitality sector.
Stamp Duty – no extension to the SDLT holiday, but measures to protect those who have exchanged contracts before but not completed until soon after 31 March 2021.
Patrick Cannon – Stamp Taxes
Barrister at Cannon Chambers | https://www.patrickcannon.net/ | @_Patrickcannon
Here's some predictions from the upcoming Budget:
The 2% non-UK resident SDLT surcharge for residential properties in England and Wales to be confirmed as effective from 1 April 2021 with Scotland and Wales to introduce a similar levy in due course. This will give a top rate of 17% SDLT on the part of the purchase price above £1.5m when the buyer is not UK resident.
The SDLT holiday which raised the minimum price at which SDLT at normal rates bites to the amount of the price over £500,000 and was due to end on 31 March will either be extended for the rest of the year to avoid a crash in the values of starter type homes or will be made a permanent feature of the SDLT rate structure.
Kevin Hall – VAT
VAT Partner at Wright Hassall | www.wrighthassall.co.uk
The VAT system relied entirely on EU legislation and the chancellor now has a free hand to change the VAT system, and has already begun to make choices, such as for financial services. There have also been teething problems with the effect of Brexit on some sectors of British business. Those using the VAT margin scheme are finding their European business stifled now, and the Chancellor has only been able to allow the margin to scheme to be used in one sector (second hand cars) in one supply chain (GB to Northern Ireland). It would be nice to think the Chancellor has some VAT tricks up his sleeve to help businesses who have struggled post-Brexit. There are many areas in VAT which could be improved upon now GB is free to do so, such as the VAT rules around property conversions, options to tax, food and drink, and so on; but I don’t think the Chancellor’s team will have had the time to come up with significant changes on 3 March 2021.
What do we think we might find?
Reduced rate of VAT for the hospitality sector - extended and perhaps made permanent
Options to tax for property transactions - time limits extended and should be simplified
A crack down on VAT avoidance – always popular in times of trouble
Online trading – additional burdens were imposed on 1 January 2021, but could a new VAT charge or VAT-like charge be imposed?
No increase in VAT rates… yet - this will surely come, but the Chancellor’s hand will be stayed while the UK recovers from its economic slump
Pete Miller – Business Tax
Founder of The Miller Partnership | The Miller Partnership | Taxation Specialists | @PeteTaxMiller
There has been much speculation about changes to capital gains tax, following the first report from the Office of Tax Simplification. However, the capital gains rules are used to encourage entrepreneurialism and, as the country emerges from the pandemic, this is the wrong time to remove those incentives. It would be premature, anyway, as the OTS will be submitting a second report before the Budget and I would expect the Chancellor to consider matters holistically before considering changes. So my prediction is no major changes to the capital gains tax regime, structurally or in terms of rates, etc.
Of course, the Chancellor might feel that this is an opportunity to score some points politically, by raising rates or reducing reliefs for what are perceived as "fat cats" of business, but that would be politics, not fiscal logic.
Request a free trial to TolleyGuidance
* denotes a required field