We’re expecting the budget to be delivered on the 3rd March 2021, and we’re expecting a few difficult tax changes as The Chancellor attempts to close the massive chasm that is a predicted £400BN deficit in 2020-2021.
The Tories pledge to not increase income tax, NI or VAT leaves little room for creativity, and so Rishi Sunak has his eyes on British businesses – many of which are struggling – to help repay debt created by the pandemic.
The bigchange we’re expecting to hear about is a significant reform of CGT. The exemption rate is expected to be slashed (to as little as £2000pa) and rates more closely aligned with income tax bands. You can find out more in this blog.
This reform has been on The Chancellor’s radar since at least November, which has caused a flurry of individuals and businesses to try and dispose of assets ahead of the changes – ironically negating the intended revenue of the reform!
Speak to your accountant before making any big moves regarding CGT.
The planned reduction in Corporation Tax from 19% to 17% back in April 2020 which was shelved looks to be fully scrapped, and we’re even expecting an increase in Corporation Tax – perhaps to around 22%.
Originally, hoping to attract businesses to remain or move to the UK after Brexit, the 17% Corporation Tax rate was eagerly anticipated. However the pandemic had other ideas, and has drastically shifted priorities. Without adjusting personal tax, business tax is left to pick up the pieces.
And while businesses have been relatively well supported through the pandemic, many have suffered, closed or are hanging on by a thread. An increase in Corporation Tax during a year when we *might* get the population vaccinated seems unfair. We do not have a reliable timeline to get the working population back to business as usual, with most workers far far down the priority list (understandably).
We think there will likely be an update to the Corporation Tax rate, but it certainly will be unwelcome news to many businesses, so we hope the Government’s covid relief package will continue to support the most vulnerable businesses.
One of those important covid relief measures are zero rates for closed businesses, and we expect this to continue if forced closures continue on a national or local tiered level.
Another of those measures is the Coronavirus JobRetention Scheme, aka Furlough scheme. It is set to continue in its current format until April when all pandemic support measures are to be reviewed.
Employees can receive 80% of their unworked wages under the scheme, but businesses are footing the full pension and NI contributions at this time. While the scheme is a valuable lifeline it doesn’t have zero impact on businesses.
Industry bodies are calling for the scheme to be extended until at least June for those who need it, which will help businesses have the confidence to continue on rather than announce redundancies or close altogether.
We do expect the CJRS to be supported beyond April, however we may see a tapering as we have experienced previously.
Additionally we hope to see an extension of the SEISS for the self employed, though we still have a portion of our self employed workforce who have not been eligible and this is something we believe should be rectified, but we’re not holding our breath!
Similarly a discount on VAT for hard hit businesses (hospitality, leisure and retail) would be of benefit, especially if the local lockdown structure returns, and businesses have little foresight of their opening rights in advance.
Extending VAT deferral introduced last year would also benefit the most hard hit businesses.
Tax relief on pensions contributions is likely to be reduced, and some people are wishing to make these contributions ahead of the budget just in case. If this is something you’re interested in please consult your accountant.