Rishi Sunak is going to deliver what is probably the most significant budget since the Second World War on March 3rd. The government has spent colossal amounts on the Covid crisis in the last 12 months and as the vaccine programme is in full swing, attention is being turned to how the nation repays the money.
What’s up for change?
In short, nothing is off the table. Speculation will build and leaks will emerge, intentional and unintentional, but here are a few areas that Rishi Sunak might focus he attention on.
Politically, it will be tricky for the Chancellor to row back on the Conservative election manifesto of not raising VAT, Income Tax or National Insurance but that was pre-Covid and it would be tempting to look at an area that raised 56% of taxes in 2019/20.
Pension tax relief is another area with potential for change. Seen as unfair because it allows higher rate taxpayers to claim more relief than their lower-paid peers, it would be easy to sell a reduction in relief to the population as part of the levelling up agenda. However, it would face a backlash from traditional Conservative voters and make saving for retirement even harder for younger workers.
Stamp Duty made the headlines last year as the temporary relief up to £500,000 turbo-charged the property market. Rishi Sunak has indicated that he has no plans to extend the holiday further or scrap the tax altogether, but with Nationwide recently warning that activity could drop off sharply if there’s no extension, expect this to be given plenty of consideration. The property and mortgage industry will doubtless be lobbying Number 11 intensely over the next few weeks.
Capital Gains Tax has been in the Chancellor’s sights since before Covid-19. Again, the levelling up agenda would be well-served by aligning it to income tax rates. However, there’s no guarantee this would increase the tax-take as people may just opt not to crystallise gains and it’s a bit of a small fish, raising just 1% of tax receipts in 2019/20. The other elephant in the room is that the jobs market is likely to require entrepreneurs to “build back better” as well as encouraging foreign investment in the UK post-Brexit, so disincentivising entrepreneurialism at this juncture would be an unpopular move with business.
Wren Sterling’s Budget programme is coming to clients in three parts:
- A same-day reaction email. We will be watching the Chancellor deliver his speech and delivering the headlines to you via email
- A full report. This will be delivered on the 4th of March by email and will include all the new tax tables for the 2021/22 Tax Year
- What the Budget means for Wren Sterling’s clients. Nick Moules will be joined by Paul Mitchell, a Director of Corporate Solutions and Phil Jenkins, a Chartered Financial Planner, to discuss what the outcome of the budget means for businesses and individuals and the actions we need to take, with a matter of weeks until the end of the tax year. This recording will be available from the 5th of March.