Derek Grant
There has been a lot of speculation on what will be in Rishi Sunak’s second budget in early March and whether there is any tax planning that you should consider before then.
The government will have to start paying down the £2 trillion of borrowings at some stage. Increasing tax rates would send the wrong message when the government is trying to stimulate economic recovery.
What the Chancellor is more likely to do is abolish or restrict some of the generous tax reliefs that we have got used to taking advantage of. That would have the effect of raising tax revenue without increasing headline rates.
Although likely to be unpopular with Conservative party voters and backbenchers, the Chancellor may target pension tax relief and capital taxes in his budget. The changes may well be announced as a ‘simplification’ of the rules but that often hides tax-raising measures in the small print.
Those buying property might also want to speed up those transactions if they can as the beneficial stamp duty land tax/land and building transaction tax rates are scheduled to increase from 1 April 2021. Listen out in the budget as the Chancellor might announce an extension of the SDLT relief to support the property sector for a few more months. If such changes are announced I would expect similar announcements for LBTT by the Scottish Government.
Some good news to listen out for would be a further extension to the CJRS furlough and SEISS grant schemes. These grant schemes are currently scheduled to end on the 30th of April.
PENSION TAX RELIEF UNDER THE SPOTLIGHT?
One area where the Chancellor could raise a substantial amount of tax would be to restrict higher rate tax relief on pension contributions.
There have been recent consultations with the pensions industry and it has been suggested that the government top-up might be increased to 30% but with no further tax relief. This would continue to encourage people to save for their pension but higher earners would get less tax relief. The pension rules continue to be complex and this may be announced as a simplification measure.
If you have spare cash that you are considering investing in your pension you might want to consider bringing that investment decision forward.