Budget 2021 Preview - What to look out for
As we add the dates of easing social measures to our diary, following the Prime Minister’s ‘road-map’ announcement, attention will soon turn to Chancellor Rishi Sunak as he prepares to deliver his second Budget on Wednesday 3rd March 2021.
PM Boris Johnson remained tight-lipped on financial measures during his statement on 22nd February, but hinted that the Chancellor will announce a package of support to protect livelihoods and businesses as society is cautiously reopened. The government has the unenviable balancing act between stimulating an economic recovery from the unprecedented COVID-19 pandemic, whilst facing what is expected to be the largest Budget deficit since the Second World War. Understandably, there is plenty of speculation about what may be announced.
The Bank of England’s chief economist has recently said that the UK economy is ‘poised like a coiled spring’ and we can expect any new measures to have minimal impact of consumer spending, as businesses look to recover from the impact of the closures. One year on from the innovative and controversial ‘eat-out to help out’ scheme, will the Chancellor once again choose to think outside the box in a bid to encourage people to go out and spend?
There have been rumours about a one-off wealth tax to raise funds for the Treasury, although it seems unlikely for a Conservative government to so crudely dip into the pockets of the very wealthy. It is more likely that we may see changes to Capital Gains Tax rates - speculation around this has grown since the Office of Tax Simplification has suggested that rates could be doubled to be brought in line with Income Tax.
Changes to Inheritance Tax are another possibility as a way of reducing the deficit without directly impacting business owners and may presently be preferable to increases to VAT or Corporation Tax, although nothing is off the table.
In terms of financial support, it is widely rumoured that the furlough scheme will be extended, and it is likely that the Chancellor will announce some equivalent measures for the self-employed, having deferred the announcement of a fourth SEISS (Self Employed Income Support Scheme) grant covering February 2021 to April 2021.
As home-owners hurry to complete house-moves before the Stamp Duty holiday ends on 31st March 2021, it is thought that Mr Sunak will attempt to calm the frenzy by extending the previous deadline.
The last thing to watch out for is whether the government chooses to ‘preannounce’ tax changes to take effect at a later date (e.g. from April 2022), rather than bring anything into force immediately. This option would soften the blow of any increases and give businesses time to prepare and recover, whilst putting in place a clear plan of how the government intends to reduce the deficit.
It remains to be seen how much of the speculation will manifest as reality, but at Matrix Capital, we are ready to advise our clients on any implications / financial planning opportunities that arise as a result of the Budget announcement.
By Edward Trotter