Budget 2020 Predictions
This year’s Budget has been eagerly anticipated. It is the first Budget from Boris Johnson’s majority government, the first from a new Chancellor and perhaps even more significantly, the first since the UK’s decision to formally leave the EU at the end of the current transitional period. The run up to a Budget like this is always filled with speculation: – how might a new Chancellor set out his agenda? Will there be eye catching announcements or a more long-term focus? Who might be the winners and losers? This year’s run up has been no different except for one development which could not have been predicted and threatens to overshadow not just the Budget but the Government’s wider policy agenda and even the functioning of Parliament itself for the next few months; the threat posed by the continuing global spread of Coronavirus.
With rumour circulating that Parliament may be shut down for a period of months, and increasing concern about the financial impact of Coronavirus on businesses and individuals, it is difficult for anyone (even the Treasury) to predict where we might be in a few days time.
So what do I think we might hear next week?
Even though the Chancellor has confirmed the national infrastructure strategy is to be delayed until after the Budget, I’d be surprised if there isn’t still a significant focus on levelling up, both regionally and economically. We could also get something on Business Rates which has long been criticised as a broken system and hitting some regional areas and sectors hard.
In the run up to the Budget, economic levelling up has focused on a reduction in tax relief for pension contributions, tax on high value homes and the potential abolition of the 10% rate of Capital Gains Tax for trading business owners (Entrepreneurs’ Relief). Many people think that a wholesale review of Inheritance Tax is also overdue. Politically, this is difficult ground for a Conservative government trying to balance its appeal to both its traditional supporter base and its new Conservative seats in the North and there’s a feeling that they’ll get the unpopular stuff out of the way now and hope that taxpayers aren’t still smarting by the next election. Such a balance could be helped by super charging other incentives – perhaps something more radical on R&D beyond the modest increase suggested in the manifesto or renewing or even increasing the £1m Annual Investment Allowance on capex. Such announcements help companies and so by extension their shareholders but might not be enough in their view to compensate for a loss of Entrepreneurs’ Relief and pension tax relief.
Personally, I think the Climate Agenda should be a corner stone of policy in every area, but I may be disappointed at how much it features in a Budget which will also need to deal with the economic impacts of Coronavirus. And we already know that announcements about work towards achieving net-zero emissions by 2050 will be delayed.
There are some obvious areas of tax policy that could help – more certainty for example on how electric cars will be taxed post 2023 might encourage people to take the leap. Such announcements though would need to align with a long term plan to fill the Budget gap which will be created by the phase out of petrol and diesel cars by 2035.
One thing is certain; this year’s Budget comes amidst a maelstrom of economic and political issues and for a Chancellor only weeks into the job the timing is a huge challenge. It remains to be seen whether he presses on with the Government’s domestic plan or whether Coronavirus overtakes the agenda.
At Garbutt + Elliott our specialist Tax team act for a range of owner-managed businesses and individuals, offering a range of bespoke tax services and tax planning advice which suits your circumstances. For more information around any tax issues related to this article or any other aspect of the tax landscape, contact Becky Maguire, Partner, Garbutt + Elliott – email@example.com.