Chancellor Rishi Sunak will deliver his budget statement on Wednesday 3rd March.
He will be under immense pressure to deliver a strategy that will balance the books, without stifling the recovery or targeting those who have already suffered greatly. In their manifesto, the Conservative Party ruled out rises to Income Tax, NIC and VAT in their term, leaving Corporation Tax, Capital Gains Tax and Inheritance Tax in the firing line, but the unprecedented circumstances could force them to break that promise. In terms of support, the Chancellor will be encouraged to extend the existing grants and support until at least the re-opening of the country in June, and for certain industries, well beyond that.
Here are our top 10 expectations from the budget:
1. Corporation Tax
Leaks suggest the chancellor seeks to increase the rate of corporation tax, perhaps as high as 25%. This may be phased in over the parliamentary term, and there could be a return to differing rates for smaller and larger companies.
2. Tourism and hospitality support
Perhaps the hardest hit sector, tourism and hospitality businesses may see the extension of the 1-year business rates holiday, as well as an extension to the reduced VAT rate on food and non-alcoholic beverages.
3. Wealth taxes
An increase in the rate of capital gains tax could be announced, with the potential for parity between rates of tax on income and capital. Alternatively, the chancellor could specifically target a rise at company share sales or property gains. Inheritance tax rates could rise, or reliefs reduced.
4. Extension of Stamp Duty holiday
It is strongly rumoured that the Stamp Duty holiday on homes costing up to £500,000 would be extended for another 3 months. The deadline of 31st March would be extended to 30 June, benefiting 90% of all sale transactions.
5. Furlough Scheme extension
It is expected that the furlough support is extended until the end of June, beyond the current deadline of 31 March. This would see businesses supported through to the period when most restrictions are lifted.
6. Help to Buy
The Help to Buy scheme appears likely to be extended to help first-time buyers with government-backed loan guarantees on properties up to £600,000.
7. Self-Employment Income Support Scheme
Self-employed business owners will hope for a fourth iteration of the scheme, to cover the months from February until the economy reopens. The last version of the scheme paid 80% to eligible business owners.
8. Pension cap
Savers enjoy several tax benefits of accumulating a pension pot, but the chancellor could look to limit or reduce the lifetime savings amount which currently stands at £1.073m. He could also limit the benefit higher-rate taxpayers benefit by capping relief at 20%, or 25%.
9. Income Tax threshold freeze
Tax brackets for 2021/22 are published on the HMRC website, but a freeze at 2020/21 levels would raise substantial revenue for the treasury. The £70 rise to the personal allowance and £270 rise to the higher rate bracket could be shelved.
10. VAT
Post-brexit, the government could utilise some of the greater freedoms to tweak VAT law, and bring particular goods and services into different rates and categories, to stimulate spending or raise revenue.