The spring Budget announcement is next week, with the Chancellor Rishi Sunak set to reveal new measures on March 3.
After such a disruptive year, it is understandable that the pandemic has come at great economic cost and the road to fiscal stability will be tough.
David Fort, Managing Partner of Haines Watts Manchester, has some predictions on what to look out for:
Capital Gains Tax – the one to watch
Last year, the Office of Tax Simplification (OTS) were asked to look at how CGT could be simplified. After the review, they suggested “more closely aligning CGT rates with Income Tax Rates. Doing so would mean basic rate payers could be charged 20 per cent, higher rate payers charged 40 per cent and additional rate payers charged 45 per cent.
Our concerns centre around this increase becoming a disincentive for business growth and increased job opportunities – all of which we will need for economic recovery. We believe the Chancellor needs to be more flexible in how he uses CGT and consider it a long-term tool to encourage innovation and investment in UK business.
Income Tax – could Middle England feel the pinch?
Now is the time to put politics aside and make some tough decisions. Raising Income Tax rates is a sure-fire way to make the Chancellor and the Government very unpopular. But the reality is, we need to raise a large amount of money and raising income tax could be the best way to do this. Historically, income tax increases have been focused on the higher rates (or the rich as they were considered). It is very possible that the Chancellor is looking at increasing some lower rates, meaning the majority of the working UK population could feel the impact. It is wise to consider what affect this could have on disposable income and consumer spending.
Online Tax – A Better Alternative?
It is important to remember that the pandemic has not impacted everyone equally. In some cases, the old adage, “In the midst of chaos, there is also opportunity” rings true. There are many innovative or tech-savvy businesses, which have used restrictions to their benefit and profited from the disruption. This could mean we see these companies, such as online retailers, specifically targeted with new or increased tax rates.
An example of this would be a different rate of tax for products sold online. These companies do not have the same overheads as many of their bricks and mortar alternatives. In turn, the difference in tax rate could improve the competitiveness of our high streets and bring consumers back into town and city centres.
Brexit – another area to consider
On top of the pandemic, some industries have been faced with huge operational challenges due to Brexit. With the cost of implication of restructures or having to set up operations in EU territories for example, it might be unfair for these businesses to be further impacted.
Will Rishi give some special consideration to companies that fall within this bracket? More than anything else, what we need from this announcement is certainty. When so many businesses are already struggling, a long-term plan would give some much-needed clarity on how to deal with this period of recovery. Once the Budget has been published, you may find that your business model has to change. We understand how much stress another disruption could cause and we’re here to help.
