Article provided by Yvette Jacobs-Lee, Private Client Tax Partner at Moore Kingston Smith, for Beacon Gainer, private wealth advisory services group.

In the 12 months since Chancellor Rishi Sunak’s first Budget, 700,000 people have lost their jobs, the economy has shrunk by 10%, and borrowing has increased to record levels. Mr Sunak needed to strike a fine balance between creating the conditions for economic recovery and collecting more tax to start balancing the country’s books.

Despite the economic backdrop, for the private client, the Budget announcements on 3 March 2021 are somewhat underwhelming. Allowances are now largely fixed until 2026, meaning earnings inflation will result in tax increases by stealth, but the hotly anticipated changes and reform were conspicuously absent from the press releases.

In the couple of weeks leading up to the Budget, almost all of the significant announcements had been trailed in the press, in many cases leaving only the detail for the Budget papers. We now know what the new rate of corporation tax will be and the timing for its introduction, the details relating to the phasing out of the stamp duty land tax holiday, and the final iterations of the furlough and self-employed income support scheme.

There had been a great deal of speculation before the Budget that capital gains tax rates could be increased. It had also been suggested that the scope of inheritance tax could be broadened. While nothing was announced in the Budget, the focus of speculation in these areas will now shift to 23 March when consultations and calls for evidence regarding the longer-term shape of the tax system will be published. Similarly, no mention was made of further reforms to the pensions regime, or the possible introduction of a wealth tax. These areas could be returned to in the future once the Chancellor is able to say more confidently that the country is on the path to recovery.

The current SDLT “holiday” has been extended to 30 June and the cliff edge for its withdrawal eased.  This will be welcomed by many private clients who might be looking for a house move after staring at the same four walls in lockdown, or taking advantage of the relief to expand an investment portfolio.  It should not be forgotten that, while SDLT is being reduced for domestic buyers, 1 April will see the introduction of a 2% surcharge on rates for overseas buyers of UK residential property.

For private clients with business interests, the rise in the corporate tax rate from 2023 makes operating through an unincorporated vehicle more attractive than previously. There will also be a shift to company cash extraction through salaries, rather than dividends for higher-rate taxpayers.

An enhanced loss relief for two years generating tax repayments for businesses and the “super deduction” for capital expenditure incurred by corporates will be welcomed by those who have lost revenue during the pandemic, or held back from investment to weather the crisis. The more cynical observer might remark that the Chancellor’s giveaways are another ploy to increase tax revenues, as they will encourage use of losses sooner rather than later when the tax rate has risen.

It is clear that the government has again followed the unprecedented approach adopted at the March 2020 Budget in continuing massive central support for the UK economy. The level of borrowing and spending reported on and announced are truly ‘generational’ in their scale and the UK will be dealing with the aftermath of Coronavirus for decades to come. We will be waiting with interest for the announcements on 23 March for a glimpse of the Chancellor’s roadmap and changes for the future.