The Budget held few surprises, pleasant or otherwise as Chancellor Rishi Sunak’s press operation had already signalled what was going to happen. It was widely trailed that the lifetime allowance would be frozen, and it has been frozen until 2026 with fiscal drag delivering what is effectively a cut.
IHT and capital gains thresholds are frozen too.
Claire Trott head of pensions strategy at St James’s Place discusses the implications in FTAdviser,
It was also widely expected that corporation tax would rise and rise it will, though not immediately, to 25 per cent from 19 per cent, though the Government argues it is still competitive with the G7 countries.
Investors have begged to differ in the Financial Times predicting it will hurt investment. The move has been described as going against Tory values by former chief secretary David Gauke in the Telegraph.
The Institute for Fiscal Studies remains very sceptical as well.
To quote: “If they [tax rises and spending cuts] are all delivered they would get the public finances into current balance – i.e. borrowing only to invest – by 2025-26. The sad truth is that that would be a balance built on the highest sustained tax burden in UK history and yet further cuts in unprotected public service spending. That is perhaps one measure of the difficulties presented by more than a decade of paltry growth followed by the deepest recession in history.”
Of course, the Treasury argues that around 70 per cent of firms will not have to pay the corporation tax rise as profits are below £50,000, noted here by the Chartered Institute of Payroll Professionals website. There is also a taper up to profits of £250,000.
In addition, beginning in April 2021, a new super-deduction will cut companies’ tax bills by 25p for every pound they invest in new equipment, meaning they can reduce their taxable profits by 130% of the cost, as the Construction Index website reports.
Advisers might ask why updating their platform or back-office systems does not merit such relief?
This is a high tax budget for individuals, though not yet as Money Saving Expert reports. The freezing of the lower and higher rate thresholds will rise in April but then be frozen to 2026.
It arguably meets the Government’s manifesto pledge not to raise the rate of income tax, VAT and NI. You can argue whether it’s a stealth tax or not - the Chancellor acknowledged that this was specifically what he was doing in the Budget speech.
The move has been criticised for bringing more people into paying income tax gradually but steadily and likewise for those paying higher rate tax.
The Bank of England was also handed a role in the move to a zero carbon transition with an expectation it will buy green bonds in any future QE. There is still a rather heated debate about what this means in practice, however.
Unsurprisingly the shadow chancellor Anneliese Dodds argues that far more needed to be done to secure the recovery.
Outside of the Budget news, the FCA is launching a new online invoicing portal on 12 April 2021 for advisers and others to access their invoices and arrange payment of their fees.
Blevins Franks has warned that PII will not cover business transacted in the EU, presenting potential problems for the 5,500 UK-authorised firms who, in 2016, were passporting their authorisations into Europe.
Leigh Day has begun its multimillion pound group claim for Woodford investors against the fund's administrators Link Fund Solutions as Citywire reports.