Budget – Sunak giveth and he taketh away
QUESTION: Can you summarise what were the key announcements made in this month's Budget by Chancellor Rishi Sunak?
ANSWER: The Budget announcements were a mixture of continued direct support for the duration of the Covid crisis, measures to boost and support recovery once the lockdown is over, and tax increases in a number of guises.
Notable (temporary) tax incentives include a two-year 130 per cent super-deduction and a corporation tax loss carry-back measure allowing qualifying losses to be carried back for up to three years. By freezing various rates and allowances, the chancellor relies on ‘fiscal drag’ across income tax allowances, the VAT and IHT thresholds, the pensions lifetime allowance and the CGT annual exempt allowance to raise almost £22bn in additional revenue – and all without breaking the Conservatives’ ‘triple lock’ manifesto commitment.
The rise in the corporate tax rate is the largest tax rise in the Budget, generating north of £17bn per annum by the end of the Parliament, almost 60 per cent of the total revenue raised.
The real question now though is whether this is enough or whether we will hear more plans for tax increases on consultation day on March 23.
Key Budget highlights include :
• The main rate of corporation tax will be increased to 25 per cent from April 2023 for companies with profits of at least £250,000. At the same time, a new small companies’ rate of 19 per cent will apply to companies with profits of up to £50,000.
• For the two years from April, companies investing in qualifying new plant and machinery will benefit from a 130 per cent first-year capital allowance.
• The personal allowance will rise to £12,570 and the higher rate threshold will be £50,270 for 2021/22 and both will then be frozen for the next four years.
• The capital gains tax annual exemption, inheritance tax rate nil rate bands and pensions lifetime allowance will all be frozen at their current levels until April 2026.
• The exemption from stamp duty land tax on the first £500,000 of residential property value will be extended to June 30 and then replaced by a £250,000 exemption until September 30.
• The coronavirus job retention scheme will be extended in full until June 30 and will be phased out over the following three months.
• The self-employed income support scheme will also be extended at its current level with a fourth grant covering the period February to April. A fifth grant will cover the period May to September, but this will be at a lower level for those who have seen less than a 30 per cent drop in turnover.
• The business rates holiday for retail, hospitality and leisure businesses will be extended for three months and will then be reduced to a 66 per cent relief until the end of March 2022.
This consultation day on March 23 may also provide us with ideas of where the chancellor is expecting to find the additional funds that he needs to deal with the debts that have built up under covid.
The chancellor spoke in his Budget about being honest with the people, and this Budget was pretty much what he had led us to expect. Yes, it was harsher on businesses, with a 25 per cent corporation tax rate being at the top end of (or beyond) expectations, but it also delivered on the support that he promised in the short term.
The real question now is whether this is enough or whether we will hear more plans for tax increases on consultation day. Until then, we may have but half the picture.
:: Feargal McCormack (firstname.lastname@example.org) is managing director of PKF-FPM Accountants (www.pkffpm.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.