Chancellor Rishi Sunak has a tricky balancing act with tomorrow’s Budget. Supporting the UK economy out of a year of Covid lockdowns vs raising tax revenues to pay the bill.
Here are the top 10 things we thought might come up in the 2021 Budget and a quick response straight after the Chancellor’s speech.
1. Extending the furlough scheme
Furlough is set to end on 30 April 2021, but with so many businesses still forced to remain closed or operating under restrictions, jobs will have to be protected, possibly to 30 June?
Furlough extended until September 2021
2. Another VAT deferral
Last year businesses were able to defer their VAT liabilities due in the quarter to June 2020. That comes to an end on 31 March 2021 with the portal now open to agree repayment plans. However, the core problem remains and maybe a further deferral scheme will be needed?
No, this isn’t happening
3. More bank loans
We have has CBILS and Bounce Back, but that money will have come, gone and been spent. Watch out for a further supported funding scheme…
New “Recovery Loans” with 80% government backed security available until 31 December 2021
4. Sector support – business rates and grants
We have already seen grants pushed our through local authorities to support retail, entertainment, hospitality and non essential businesses – more will be needed and hopefully available to a wider range of businesses in need.
Yes, more grants will be available
5. EV infrastructure support
With the clock ticking until many car manufacturers stop selling petrol and diesel cars, the electric vehicle charging infrastructure in most of the UK is largely non existent – something dramatic has to change. Charging cables draped across public footpaths and car parks are just not realistic, range anxiety and taking a couple of hours to recharge a car to get home is just not workable.
Nothing on EV cars or infrastructure
6. Petrol and diesel duty
Massive amounts of VAT and duty are raised on vehicle fuel. If we are all going to have to plug in, in a few years, how will this tax be replaced? In the short term, a hike in fuel duty may be on the cards to part pay for the Covid funding.
No real changes here
7. Freezing personal allowances
The Government made a manifesto pledge not to change the rates of income tax or VAT – so if you can’t change the rate of tax, change or freeze the tax free allowances and change the rate thresholds…?
Yes, the basic rate £12,500 and 40% £50,000 thresholds will be frozen from April 2022 to April 2026
8. Increased corporation tax
Most tax commentators seem to think an increase in the small company rate of corporation tax, up from the current 19% is perhaps inevitable. Expect a 4% or even 5% increase… but from when, possibly from 1 April 2021?
Yes, corporation tax rates will be going up to 25% from April 2023, but only for profits above £250,000 with a new £50,000 small CT rate and the return of tapering of marginal rates in between
9. Stamp duty extension
The UK housing market is very active, fuelled to a degree by the zero stamp duty on transactions up to £500,000 completed by 31/03/2021. This really needs to be extended – but by how long… 3 months, 6 months?
Good news, NIL rate SDLT will remain £500,000 until the end of June 2021 and then will be £250,000 until September 2021
10. CGT in line with IT
Capital gains tax is not a great revenue raiser for HM Revenue and the favourably low rates of CGT impact only a relatively small number of taxpayers. Aligning CGT rates with an individual’s marginal income tax rate will happen at some point, but is this the right time?
No, this isn’t happening
So… it looks like 6 out of 10 and we were spot on with most of the big changes.
Check out our 2021 Budget summary and other articles exploring the 2021 budget in greater detail.