Mark Tibbert, Partner and tax specialist at Thomas Westcott Chartered Accountants, considers what the Chancellor might announce in the Spring Budget on 3 March.
With around three weeks to go until the Chancellor stands up to present what will be his second Spring Budget, what can we expect him to say? There has been much debate over what he should or might do, but what we can say is only the Chancellor currently knows.
Speculation on CGT and corporation tax
At the start of the year, there was increasing speculation that capital gains tax (CGT) rates and reliefs could be targeted as a way of increasing the tax take to help fund the high levels of government borrowing over the past year, with the possibility of aligning capital gains rates with income tax rates.
In recent weeks there seems to have been a move away from immediate capital gains tax changes and more talk about possible increases to corporation tax rates, although any such changes would need to be carefully implemented so as not to cause a stagnation of any economic recovery.
What about changes to VAT?
In addition, there have been various representations to government seeking to influence what might be included. These have ranged from extending the current Stamp Duty Land Tax (SDLT) holiday on property purchases below £500,000 to extending the reduced VAT rate for the hospitality sector and cutting the main rate of VAT to help stimulate an economic recovery.
Questions around Covid support
Alongside tax policy, despite continually being pushed for earlier comments, the Chancellor has remained committed to his stance that he will not be drawn on any changes for further Covid support measures until his Budget statement. Areas we expect comments to be made on are:
• Whether the furlough scheme will be extended or given a phasing out, given it is currently due to end in April.
• How the fourth round of the SEISS for the self-employed will be calculated and paid. Many are expecting 2019/20 figures to be used for this but the biggest question is how quickly the support will be made available given that, by the time of the announcement, we will already be over a month into the period any payment is meant to be helping to cover.
Will the changes be immediate?
In recent days there have also been signs that the Chancellor could use his statement to announce changes that could apply from April 2022 rather than immediately. With the latest figures showing a significant contraction in the UK economy, albeit with some signs of recovery and hope that announcements planned for 22 February will see a road map out of the current restrictions, this could give hope to businesses across all sectors.
Measures we are expecting to see announced in light of the rumours and speculation are:
• An extension of the reduced rate VAT for the hospitality sector for all of 2021/22.
• An increase in the rate of corporation tax.
• A freezing of income tax and personal tax allowances
• Proposals to increase capital gains tax rates through alignment to income tax rates from 2022
• A more gradual phasing out of the current SDLT reduction.
For an immediate reaction to the Budget announcements, Thomas Westcott’s expert panel will discuss their initial review and reactions to the Chancellor’s Spring Budget at a Thomas Westcott webinar and Q&A on Thursday 4 March 2021. Sign up for this FREE event.
Mark Tibbert is a Thomas Westcott Partner, based in the firm’s Barnstaple and Bideford offices. With a particular interest in tax, he advises businesses of all sizes and sectors, from owner-managed businesses through to international corporate organisations.