The 2021 Budget is almost here. Last year’s Budget announcement from the Chancellor was wisely scrapped, as Rishi Sunak and his team acknowledged the futility of attempting to put together a coherent financial plan in the light of the rapidly escalating COVID-19 pandemic. So what can we expect from Mr Sunak on 3 March? After the Prime Minister’s announcement to lay out a roadmap out of lockdown, firms in our region are looking forward to getting back to business, and doing what they do best: creating a dynamic working environment which supports growth and financial stability, and moving away from financial loans and handouts.
The current furlough scheme (the Coronavirus Job Retention Scheme) is due to finish at the end of April, but it is widely expected that given the slow return to normality for much of the working population, it will be extended or modified to go on for several more months until businesses can fully reopen. Boris Johnson dropped a broad hint when he said that “We will not pull the rug out. We will do whatever it takes to protect jobs across the UK and my right honourable friend the Chancellor will set out plans next Wednesday.”
In his previous Budget in March 2020, the Chancellor announced a twelve month suspension of business rates, which would normally have contributed £30 billion to the economy. With many businesses still closed it is very possible that this business rates holiday will be extended for shops, restaurants, pubs and leisure facilities, at least until they are fully up and running again. The reduction of VAT to 5% for the hospitality sector is also likely to be prolonged.
Stamp Duty Land Tax
The reduction in the Stamp Duty Land Tax rates since the middle of last year has widely been seen as a success and has pushed up house prices while keeping the market moving. However during the most recent lockdown there has been a delay in some house purchases being completed before the expiry of the reduced rate, and it is anticipated that the Stamp Duty reduction may be extended, although possibly only for sales which are already in the process of being finalised.
Will anything be different post-Brexit?
The Chancellor will undoubtedly avoid anything which has a negative impact on consumer spending. However given the £300 billion cost of Covid support measures over the past year, he may well be looking at introducing innovative measures which may now be possible post-Brexit such as an enhanced Digital Sales Tax.
Many businesses have moved firmly into the digital sales space to offer goods and services online rather than through a physical location. Some have done very well throughout the pandemic and many commentators have argued that they should pay more tax – or possibly that the current Digital Sales Tax should be widened in scope to capture more online sales.
Rishi Sunak is likely to want to support the government’s carbon reduction agenda, so we may well see increases to capital allowances which support this. Additionally, there may be further taxation measures linked to carbon emissions such as new taxes on single use items like plastic coffee cups, or possibly a higher rate of VAT for environmentally damaging products or services.
Pressure remains on the government to support those who have lost their jobs as a result of the pandemic, particularly young people. It is likely that existing measures will be extended and/or reviewed to enable this group to find employment opportunities.
Capital Gains Tax
There has been considerable speculation that Capital Gains Tax may rise, possibly to align it with Income Tax rates. This would mean business owners paying higher taxes if they wanted to sell a company or shares. The proposed move, which would potentially raise about £14 billion has been decried by entrepreneurs, and would also be another blow for entrepreneurs, who last year saw a cap on Entrepreneurs Relief from £10 million to £1 million over a lifetime.
There have also been rumours of changes to Corporation Tax for some time, and an increase of 1% in this tax could potentially bring in an extra £2 billion in the first year alone, although like the rumoured rise in Capital Gains Tax, this would be an unpopular change for the business community.
None of us can be sure what will be announced on 3 March, but we will be sharing the announcements with you as they happen, and our Budget Breakfast the next day will provide insight and analysis on what the Chancellor’s statement will mean for both businesses and individuals in our region.