Today, Chancellor Rishi Sunak delivered his first budget since the pandemic started. Here's what our tax specialist and Partner at Tunbridge Wells, Craig Harman, had to say:
Perhaps unsurprisingly, this is certainly one of the more memorable budgets in recent history and will certainly take some time to go through the detail.
It was widely anticipated that the current coronavirus support measures would be extended to coincide with the road map for the lifting of restrictions. However, the extension went much further than expected with the majority of the measures now running to the end of September. This will be welcome news to individuals and businesses struggling financially as a result of the impact of COVID-19 and will provide greater certainty if the lockdown isn’t eased as quickly as anticipated. In addition, further grants and loans were announced to provide a much needed boost to closed businesses once they can reopen.
As expected, part of the budget also focused on how these support measures would be paid for in the future and included two key tax rises.
The first announcement was that the personal allowance and higher rate tax threshold would be frozen from 2022 to 2026. Although income tax rates will remain constant (in accordance with the Conservative manifesto), taxpayers will find their tax liability increasing as their income rises. Such a move could be referred to as a stealth tax. However, in fairness to the Chancellor, he was very open about the impact this would have.
Secondly, the corporation tax rate will increase from 19% to 25% in April 2023. The fact that there was an increase didn’t come as any surprise, however, the level of the increase did. My expectation prior to the budget was that this would increase to around 21%-23%. To soften the blow, the increased rate will be tapered so that only companies with profits of more than £250,000 will be taxed at the full 25% rate. Those with profits of less than £50,000 will continue to pay the current 19% rate.
In the meantime, further incentives have been announced for companies by allowing a 130% super-deduction for capital expenditure and the more flexible use of losses.
Clamping down on tax evasion has been a clear target of the government over the past few years and this is set to continue with resources allocated for a new Taxpayer Protection Taskforce.