Budget 2021 – Our predictions

At the time of writing we are all expecting Chancellor Rishi Sunak’s 2021 Budget to be delivered on 3rd March.

The worldwide health issues caused by the COVID-19 pandemic together with the knock-on economic effects since his last Budget will inevitably be reflected in the content of Budget 2021.

Here are some of the issues affecting contractors, small businesses and the general body of taxpayers which we think may feature this time round:

• It goes without saying that we expect to see ongoing COVID-19 support measures to help small businesses and the self-employed probably into the summer.
• Post-Brexit the UK has more freedom to manipulate VAT rates on products and services although a change in the standard rate, either up or down is unlikely.
• The cut in Stamp Duty Land Tax we saw last year proved successful in boosting the property market and the wider economy and this could be extended for a few more months.
• There has been speculation that the rate of Capital Gains Tax will rise. This has been fuelled by the Office of Tax Simplification (OTS) recommendation of equalising CGT rates with Income Tax rates. If the Chancellor did not want to go that far, a reduction in the Annual Exemption Allowance for individuals (currently £12,300 pa) could be reduced at some time in the future.
• Talk before the last few Budgets about cutting pensions tax relief, either by restricting it to the basic rate or introducing a composite rate has been ignored by the Chancellor but this time round there may be a lower threshold of resistance for such a move.
• Businesses paying Corporation Tax could see a plan to move the rate up from its current 19% rate to something like 22% over the next few years as the Government begins to clawback some of the huge payments it has had to make to deal with the pandemic.
• On the giveaways side we could see tax cuts for start-up businesses and investment incentives. This could include a further deferral of the planned reduction of the Annual Investment Allowance from £1m to £200,000 beyond January 2022.
• With the Cop26 climate summit in Glasgow later this year we would not be surprised to see the green tech agenda moving up the priority support list.
• Pressure from the Low Incomes Tax Reform Group could see the current £50,000 threshold for the High Income Child Benefit Charge raised to avoid the levy hitting basic rate taxpayers. It would need to go up to £50,270 in line with the new income tax higher rate threshold.
• Radical changes to or the abolition of Inheritance Tax have been part of Budget speculation for a year or two after the Government asked the OTS to review.

As always we will deliver our opinion on the budget as soon as it has been released and we’ll also see how many of our predictions have come into fruition.