What can we expect from the Budget on 11 March?

25th February 2020

Well, what we did not expect was for Sajid Javid to resign just four weeks before his first Budget. The Budget on 11 March already promised to be interesting: the first Budget of a parliament is often a time to make unpopular announcements, and Boris Johnson is likely to feel all powerful after his impressive majority in the 2019 election. It is also our first Budget since leaving the EU and therefore “taking back control”.

If we add to the mix a new and inexperienced Chancellor in Rishi Sunak, one might say that all bets are off. But there are certain areas that seem likely to feature on 11 March.

Pension tax relief

Subject to certain limits, higher rate taxpayers get tax relief at 40% of their pension contributions, and basic rate taxpayers get tax relief at 20%. The cost of this tax relief is high at around £21 billion and there has long been speculation of a flat rate of relief at 30% being introduced. However, many are now predicting a possible reduction to 20% for all taxpayers.

The lesson here is that, if you were planning to top up your pension before 6 April, you might want to consider doing it before the Budget, just in case!

Capital gains tax

The generous Entrepreneurs’ Relief allows certain gains to be taxed at 10% instead of the usual 20% up to a lifetime limit of £10 million for an individual. It has come under heavy criticism as many consider that it does little to incentivise entrepreneurs and Boris Johnson has stated that the tax break is making some rich people “even more staggeringly rich”.

We do not know what changes might be made but predictions include reducing the lifetime limit, increasing the qualifying percentage and holding period, and adding a full time working requirement.

It may be harder to achieve than accelerating a pension contribution, but if you are currently selling your business, it could be a good idea to get it done before the Budget.

Inheritance tax

This one is even harder to predict although some form of shake up is likely. There have been recommendations from the Office of Tax Simplification and a cross party group of MPs for wholesale changes to the inheritance tax rules which are seen as complex and outdated. Unfortunately, the two groups do not agree on the best way forward although there is some common ground.

Stamp duty land tax (SDLT)

During the election campaign, Boris Johnson pledged to remove SDLT for sales of homes under £500,000. He has also talked of changing who pays the tax, making it the seller’s responsibility. Reactions to his promise are mixed, with fears that it could create a two tier property market in certain parts of the country. Whilst a reform of SDLT may be a good thing, let us hope that any changes will be carefully thought through and not rushed.

Watch this space!

This tax partner has found some of the recent Budgets lacking in excitement with many changes pre-announced before the actual day. However, I am optimistic that the Budget on 11 March will certainly be interesting, whether or not I like what Rishi Sunak has to say!

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