Our Chief Executive shares his thoughts following the Spring Budget

London 1 Hull 1

Liverpool and five other cities also scored in Rishi Sunak’s second budget as these areas will benefit as a “freeport” to encourage inward investment similar to Enterprise Zones created in the 1980’s (back when the Housemartins were in the charts).

The Budget, which predictably, is now largely well telegraphed, therefore contained no real surprises and the continued support the UK Government has made available to help us all come through the pandemic is very much welcome.

The financial impact of the policies announced are forecast to cost the UK some £60 billion in the current tax year and c£8 billion in 2022/23.

The largest contributors being:

  1. Self-employment income support scheme | £13bn
  2. 130% “super deduction” capital allowances | £12bn
  3. Job retention scheme | £7bn
  4. Business rates relief | £7bn

The statistics forecast that 1, 3 and 4 fall away this year as the vaccine led recovery enables these taps to be turned off.

However, the capital allowances are forecast to cost a further £13bn next tax year.

Looking further ahead, the impact of changes to the corporation tax rate and the freezing of personal allowances and thresholds for income tax should start to generate the payback the Government is after.

These changes will generate £16bn, £22bn and £25bn over the three years into April 2026.

Given the quantum of the Governments’ pandemic policy responses, these impacts make a difference, but we can safely predict that this will not be the end of tax changes. Do note the specific wording, as pledges have been made on headline rates. However, freezing thresholds and allowances means that inflation is not taken into account and therefore, in real terms, they do bite at all levels of earnings.

The Government has also made it clear previously that it only wants an annual fiscal budget (we had got used to two a year) and I wonder whether this will return once the full impact of ending lockdown has been seen because no-one can accurately predict the future and what we will all do in our business and personal lives once we are able.

Impact of the Budget from our perspective

From Stellar’s perspective the freezing of the nil-rate band for inheritance tax is going to drag further people into this particular net and continued planning is going to be vital. Inheritance tax receipts are forecast to rise from the current £5bn to £6.6bn by end of 2026.

It is disappointing that ISA levels have remained frozen but clearly the Government is preferring us all to invest rather than save. CGT thresholds remain frozen which will also drag more into the net with a 40% increase in forecast revenue for the Government over the next five years.

For the businesses in which we invest we welcome the range of initiatives to support SMEs including:

  • Extension of job retention scheme
  • Restart grants for leisure and hospitality
  • VAT reduction for leisure and hospitality
  • Business rate relief
  • SDLT cut
  • Mortgage guarantee scheme

The headline will be on corporation tax but stealth measures on thresholds have a considerable impact.

The super tax relief on investment for the next two years is the stand-out new initiative and to be applauded.

It is a good start, a balanced budget but not surprising in the circumstances.

Watch out for more tax increases in the future and the next review may come sooner than you think as the focus of the traditional autumn statement may change.


Written by Jonathan Gain


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