I think that I have learnt from far too many Past blogs that predicting what is likely to come up in a budget is a fools game. Perhaps though this year just might be different. The March budget is set amongst the background of a global pandemic and dare I say it, our coming out of the other side of what has been such a tough period. But, what we all agree is that somehow the cost of the Covid-19 pandemic has to be paid for in some way and at some point. The big question is whether this budget represents that start of that process. So here are some thoughts that we’ve heard from within the financial services industry about what the budget just might contain.
1. Changes to Capital Gains Tax (CGT). It has long been thought that the rates for CGT are out of kilter with those of Income Tax. Bringing this in line and perhaps lowering the annual CGT exemption would generate revenue for the government and might be seen as a tax on the more wealthy, and therefore more palatable.
2. Corporation Tax increase (CT). At 19% our rate is lower than many of our neighbours. Is there room for movement on CT Rates whilst still retaining our competitive position?
3. Inheritance Tax (IHT) changes. The Office for Tax Simplification made recommendations in 2019 that might be implemented now. This could include lowering of the annual gift allowances or reducing the 7 year qualifying period for gifts. Also the tax free uplift for capital gains tax on assets that qualify for Business property relief may be under threat.
4. National Insurance (NI). Although it was an election pledge not to increase NI, a new higher rate for very high earners could be introduced as a further tax on the wealthy.
5. Abolition of the Pension Tax-Free Lump Sum. This is a perennial budget rumour with suggestions ranging from a full abolition to some form of restriction.
So there it is, 5 things that may or may not happen in the 3rd March budget. Will they happen? Well I just haven’t got a clue and personally I wouldn’t be surprised if essentially nothing happens in the budget. That would of course make the Chancellors Autumn Statement suddenly a very interesting affair.
Gary