Martin Pryor, of Blackwell-based Pryor Portfolio, reviews Rishi Sunak’s second Budget.
On some counts this Budget was Rishi Sunak’s 15th major announcement since his first Budget, just under a year ago. During this period, the pandemic has dominated the Chancellor’s actions and this was true of his latest Budget.
To no small degree the framework for Mr Sunak’s latest appearance at the despatch box had been set by the data-dependent (but date-filled) road map outlined by the Prime Minister nine days before the Budget.
Mr Sunak extended the main employment support schemes to the end of September. The most significant of these, the coronavirus job retention scheme (CJRS – furlough scheme), was covering 4.7 million employments at the end of January with a cumulative cost of nearly £54 billion.
According to the Chancellor, the government’s total pandemic-related spending during 2020/21 and 2021/22 will amount to £407 billion.
To put that figure into context, it is £14 billion more than the total amount that income tax will produce over the same two years, according to the Office for Budget Responsibility (OBR).
Such spending has left a hole in the UK’s public finances that the Chancellor has regularly said must be addressed.
However, many outside bodies, from the International Monetary Fund to the Institute for Fiscal Studies, have told him that now is not the time to raise taxes.
Their argument is that he should only address the deficit (£355 billion in 2020/21) once the economic recovery is firmly entrenched.
In this Budget, Mr Sunak has largely followed that cautious advice, initially limiting his tax rises to the old stealth option of freezing most personal tax allowances and bands until 2026.
However, from 2023 he has been bolder, with no less than a 6% increase in the rate of corporation tax.
More changes may be aired on 23 March 2021, so-called ‘Tax Day’.
An in-depth pdf of Pryor Portfolio’s analysis of the Budget and what it means to you can be downloaded here.
■ The main rate of corporation tax will be increased to 25% from April 2023 for companies with profits of at least £250,000. At the same time, a new small companies’ rate of 19% will apply to companies with profits of up to £50,000.
■ For the two years from April 2021, companies investing in qualifying new plant and machinery will benefit from a 130% first-year capital allowance.
■ The personal allowance will rise to £12,570 and the higher rate threshold will be £50,270 for 2021/22 and both will then be frozen for the next four years.
■ The capital gains tax annual exemption, inheritance tax rate nil rate bands and pensions lifetime allowance will all be frozen at their current levels until April 2026.
■ The exemption from stamp duty land tax on the first £500,000 of residential property value will be extended to 30 June 2021 and then replaced by a £250,000 exemption until 30 September 2021.
■ The coronavirus job retention scheme will be extended in full until 30 June 2021 and will be phased out over the following three months.
■ The self-employed income support scheme will also be extended at its current level with a fourth grant covering the period February to April. A fifth grant will cover the period May to September, but this will be at a lower level for those who have seen less than a 30% drop in turnover.
■ The business rates holiday for retail, hospitality and leisure businesses will be extended for three months and will then be reduced to a 66% relief until the end of March 2022.
Download the full analysis as a pdf here.