Download our free Tax Planning Checklist

It is not long now until the end of the tax year, and the Budget is on 3rd March 2021. Taxpayers across the UK are considering how they can mitigate their liabilities from the last year.

To help you prepare, we have put together a helpful checklist.

Download our Tax Planning Checklist

It includes: 

  • Capital allowances
  • Inheritance tax
  • Mitigating tax on business disposals
  • R&D tax credits
  • Reducing tax on pensions and retirement
  • Tax-efficient investments
  • And much, much more.

Budget 2021 

The deficit is expected to reach around £400 billion this year due to the cost of economic support measures during the Coronavirus crisis and the impact of the problem on the economy and, in turn, tax receipts. That is around seven times higher than the £55 billion deficit forecast by the Office for Budget Responsibility (OBR) in March 2020.

As a result, speculation has been mounting in recent months that the Chancellor, Rishi Sunak, will announce significant tax rises at the Budget on Wednesday 3rd March 2021 or at least set out a road map of tax changes over the coming months and years starting in earnest in an additional Autumn Budget.

What tax rises could we see at the March Budget?

There are many options open to the Chancellor – some of which more likely than others – as he considers what to do in March. Complicating matters further still, any tax changes could be announced with immediate effect or to take effect at some point in the future.

The sheer number of options open to the Chancellor means predicting what will be in the Budget is hugely uncertain. However, we can get an idea of which might be more likely than others from press reports based on well-informed sources.

Capital Gains Tax

In November 2020, the Office for Tax Simplification (OTS) published a report into Capital Gains Tax (CGT), which recommended that the ministers consider bringing it into line with Income Tax in a move that would approximately double the amount owed on any given transaction.

It is also possible there could be changes to the annual exemption or Entrepreneurs Relief, with the possibility that Entrepreneurs Relief could be scrapped or modified significantly.

However, few national papers have trailed changes to CGT as an instant possibility in recent weeks.

Corporation Tax 

The Times reported that the Chancellor is considering increasing Corporation Tax. Corporation Tax is currently at historically low levels, having fallen from 28% in 2010 to 19%.

Whether such an increase comes to pass may depend on the vaccine programme’s continued success and how long the current lockdown lasts.

Replacing Council Tax and Stamp Duty with a new Property Levy 

The Mail on Sunday reported that the Chancellor is considering a plan to replace Council Tax and Stamp Duty Land Tax (SDLT) with a new national property levy, based on current values.

However, the report says that such a change would not be imminent.

Extension of Stamp Duty Holiday 

The Sunday Times reported that the current increase in the SDLT threshold to £500,000 would be extended. However, reports elsewhere say this will not be the case.

Reduce Tax Relief on Pension Contributions 

The Daily Express reported that tax relief on pension contributions could be limited to the basic rate at the next Budget.               

Introduce a Wealth Tax

An independent commission established last spring by the London School of Economics, the University of Warwick and the Economic and Social Research Council to analyse proposals for a wealth tax has rejected an annual tax but has advocated a one-off charge, saying: 

“A well-designed one-off wealth tax would raise a total of £260 billion at a rate of 5% over £500,000 per individual or £80 billion at a rate of 5% of £2 million per individual, payable at 1% per year over five years.”

While the Chancellor has rejected a wealth tax, the potential revenue could tempt him into a u-turn. Any such tax would likely be implemented immediately and without warning to prevent planning. 

Planning now

The 3rd March 2021 Budget is amongst the most uncertain for years, and it is important to take account of your whole tax position in preparing for the possibility of tax rises this year or in future years.

Please contact us today to find out how we can help you before and after the March budget.