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A cautious Budget?

View profile for Ben Taylor
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In the lead up to the budget a number of economic commentators urged caution in respect of an increase in tax, so as not to stifle the economic recovery of the UK. That being said, with UK national debt the highest since 1963, it was still expected that there would be significant tax increases. However, that appears not to have happened. The Budget announced today seems to be cautious, focusing on businesses and employment, and we seem to have further spending, including in respect of the furlough scheme.

On the face of the Chancellor’s statement, some of the standout tax announcements include:

  • Corporation Tax will increase to 25% from April 2023, and a small profits rate will apply so that that rate applies on profits over £250,000. This is not a huge surprise as the current rate of 19%, is not considered particularly high. It will affect a number of businesses across the country, but who have been given time to plan for the increase. Businesses will also be interested in the new deductions for investment. The increase in Corporation Tax will also affect those holding investments in companies, as part of wealth strategies.
  • Inheritance Tax nil rate band and residence nil rate band will be frozen until April 2026. The ‘traditional nil rate band’ has not changed since 2009 and is quite arguably overdue an increase. Despite this, we did not see the level of changes to IHT many feared.
  • To keep to Conservative promises, an increase in Income Tax was not expected. The Income Tax Personal Allowance will rise with CPI as planned to £12,570 from April 2021 and will remain at this level until April 2026. Marginal rates will stay the same beyond April.
  • The Annual Exemption for Capital Gains Tax will also be frozen until April 2026. We did not see a move to increase CGT rates, or an alignment with Income Tax Rates which will be welcomed by those in the process of selling or looking to engage in estate planning.
  • The SDLT ‘holiday’ has been extended until 30 June 2021. From 1 July 2021, the Nil Rate Band will reduce to £250,000 (from the current £500,000 threshold) until 30 September 2021 before returning to £125,000 on 1 October 2021. This will no doubt comfort those in the middle of deals and help to prevent deals from collapsing as a result of a cliff edge that would have otherwise applied. Relief was also introduced for the new Freeports.

Of course, in each case it will be necessary to review the full Budget report for the details.