This could be a Budget of surprises, or it could be a damp squib. Either way, we will be cutting through the hyperbole and jargon and bringing you a straightforward analysis within an hour or so of the Chancellor sitting down.
Many of our clients tell us that they no longer listen to the Budget speech live as it’s more of a political showcase than a real spending announcement and revenue raising statement. That’s true in a way. But it’s what’s in the fine print that matters. As the Chancellor ends his speech, all of the details will be released to the Treasury website and we will be analysing them and seeing what it means for you. We will be posting our initial thoughts within an hour or so of the Chancellor finishing speaking.
So, what might we learn in the Budget and what action might you need to take urgently?
- Re-commitment to a 17% corporate tax rate
- Re-commitment to increasing the personal tax allowance to £12,000 by the end of this Parliament
- Confirmation of the changes to how partnerships/LLPs will be taxed and a further restriction on mixed partnerships with corporate members (in response to a consultation document issued last August)
- A promise to simplify the qualifying criteria for various tax-efficient fund raising schemes (SEIS/EIS/VCT) once the EU shackles have been released
- Confirmation of changes to the VAT Flat Rate Scheme to stop perceived abuse. This planned to be effective from 1 April so those who use the scheme will need to act fast and work out if they are likely to be worse off and if so, what they can do about it.
- Further anti-avoidance measures which will no doubt also catch perfectly legitimate transactions. Some of these may have immediate effect so urgent action may be required, especially if transactions are in progress.
- Simplification of the personal tax residency rules – the Statutory Residence Test is fiendishly complicated and unworkable
- A commitment to simplify (and rise?) VAT rates post Brexit (no longer tied to minimum rates by EU legislation)
- Abolition of the Additional Rate Tax (45% for those earning above £150K pa)
- Gradual merging of income tax and National Insurance
- Hypothecated healthcare tax. There is probably more concern about healthcare funding than any other public service at the moment. There is a widespread call for a specific ring-fenced (hypothecated) tax to fund the NHS, with many people saying that they would pay more tax if they could be certain that it would go directly to healthcare. But hypothecation doesn’t work. It was dabbled with in the 1970s and many people tried to withhold tax rather than it going towards defence.
- Reduction in corporate tax rate to 15% or lower to encourage trade deals. In our view this would isolate the UK from most of our major trading nations and be viewed as unfair competition and the attempt to create a tax haven. It would also widen the gap between personal and corporate taxation and there would need to be a raft of anti-avoidance legislation to prevent people using corporate structures to shelter tax.
- Fundamental overhaul of capital gains tax to tax short-term gains as income and long-term gains as capital.
Finally, our greatest wish is that we start to see a simplification and shortening of the tax code. Of course legislation is required to ensure that taxes are not avoided, but we need clarity, not ambiguity, workable solutions, and above all, certainty.