1st FEBRUARY 2021
Thoughts from Ian Kelly, Tax Partner, Davies Tracey.
Well, in the midst of the pandemic and another lockdown, we have a Budget on its way with Chancellor Rishi Sunak due to present his second on 3 March.
It’s fair to say that some view Sunak as having emerged from the current crisis with his reputation enhanced whilst others comment that he has done nothing that any other Chancellor would not have done in the same position and that it’s easy to spend other people’s money.
The problem for the MP for Richmond is how and when to start to pay back the huge cost of the financial assistance and get the economy moving in what are still very difficult times; he had a chance to intervene a few months ago with an Autumn Budget but which, of course, never took place.
Sunak has a fine balancing act: to encourage people to spend to stimulate the economy but one constrained by the lockdown; to support businesses with Job Retention Scheme and the Self Employment Income Support assistance and spreading of tax payments and yet trying to maximise tax revenues.
The High Street continues to struggle and contract; unemployment is rising; Stamp Duty Land Tax and VAT initiatives are due to run out and Coronavirus support measures are coming to either renewal, albeit perhaps with some tweaks, or phasing out
And I’ve not even mentioned the word, Brexit, whose impact has yet to filter through, either politically or financially, so much are we fixated with Covid.
So, what might Sunak do that are easy wins; find favour with the population as a whole and yet have an impact?
The first £2,000 of dividends are currently exempt, might this threshold be under threat?
Align income tax and dividend income tax rates?
A charge to National Insurance Contributions on close company dividends?
Inheritance Tax Overhaul
Might the Residence Nil Rate Band be abolished?
Scrap the Capital Gains Tax uplift on assets on death?
Introduce an annual tax-free gift exemption of £30,000?
Capital Gains Taxation
Reduce the annual exemption from £12,500 to £5,000 or £10,000?
Changes to Business Asset Disposal Relief CGT rate of 10% and £1 million lifetime allowance?
Increase CGT rates of 10%, 18%, 20& and 28% to, or nearer to, income tax rates?
Personal Pension Tax Relief
Limit tax relief to the basic rate of 20% or introduce a hybrid 30% rate?
Increase CT rate from 19% to 20%
If you have questions about how any of these possible changes could affect you, please don’t hesitate to contact me to chat further.