Spring Budget - Our Predictions

After 10 years of financial discipline in the wake of the financial crisis in 2011, the Conservatives have found themselves since the pandemic struck presiding over the biggest borrowing binge since the Second World War.

And never before has the Chancellor’s name been so well known to the general public as he stands up in parliament dolling out billions of taxpayers fund to support worker’s wages and support the fragile economy. The Autumn Budget last year was cancelled and replaced with an ominous ‘Spending Review’, and Sunak explicitly said then that balancing the UK’s books was his ‘sacred duty’.

So what should we expect at the Spring Budget, now less than a month away, brining in changes from the new tax year starting on 6 April 2021?

Short Term Goal: Continued COVID Support

Of immediate concern to the majority of businesses and workers is the extension of the furlough scheme, or some other iteration of the scheme that may target particular sectors who will need continued financial support. At the time of the last extension of the furlough scheme, there was no anticipation of a third lockdown, but as a result of the covid variants that led to this latest national lockdown, you would expect the furlough scheme to continue.

There is also a hope and expectation that the extra £20 per week on Universal Credit will continue whilst maintaining no ‘upper floor’ limit to access to state benefits.

For the self employed, we will hear more on the financial terms and eligibility of the fourth Self Employed Income Support Scheme, with the expectation that more recently self employed people will be able to apply if they continue to be adversely affected by the pandemic. This fourth grant covers the months of February, March and April, and like the other grants, will likely pay out towards the end of this period, in April.

Medium Term Goal: Stimulating growth

According to the Financial Times, Mr Sunak is planning to roll out a recovery plan on 22 February, alongside the Prime Minister that day, who will give a high level overview of plan to ease lockdown restrictions, in England at least.

There is not much detail as of yet, but we would expect Mr Sunak to continue on the theme of job creation via his Green Agenda.

Tax rises, or no tax rises, that is the question

The rumour mill has been gathering pace this month, with tax rises rumoured to happen in National Insurance for the self employed, raising of fuel duty, cutting of pension relief and a change to the capital gains tax system, although nothing official has been announced yet.

Longer term, there are rumours of an increase to corporation tax, which we think is likely bearing in mind we have the lowest rate across Europe. However, set this next to the rumours of how what a post Brexit Britain will look like, and in particular the wish by Government to turn the UK into a ‘mini Singapore’, perhaps corporation tax will reduce to 17% as once planned pre-pandemic.

We will also have seen the rumours on taxing the larger profits of online retailers for a steady playing field for high street retailers, but this will be complex and difficult to implement in the short term.

What about Property?

Many are calling for the extension of the the current six-month stamp duty holiday beyond 31 March expiry date. Again, at the time of putting this extension in place, the Chancellor certainly was not expecting the continued uncertainty around the pandemic, so there could be an extension, but perhaps only for those homes that have offers already.

There is also mounting pressure on the government to help those living in cladding buildings, as bills rack up for leaseholders and the onus to get dangerous cladding removed as soon as possible. The expectation is that a large review will take place on who is liable, but you would expect some funding increase from the government also.

What else will we see on 3 March?

With the rise of the contactless payment from £30 to £45 to help reduce cash transactions during the pandemic, the FCA have commissioned a report for the case to increase this again to £100 per transaction, as there are a growing number of people being refused due to cash payments.

perhaps Mr Sunak will also have a surprise up his sleeve as he did at the last Spring Budget, where he announced the hugely popular Eat Out to Help out Scheme. There are rumours of a similar initiative for a theatres and cinemas, although since the news of more dangerous covid variants, this may be a step too far.