Spring Budget: Key Headlines
The Chancellor’s Spring Budget did not bite quite as hard as some were expecting, but the state of the public finances one year on from the start of the pandemic required some hard decisions.
It was expected, in many quarters, that a form of so-called wealth tax would be introduced along with inheritance reform and an anticipated increase in capital gains tax. That didn’t happen. Inheritance tax thresholds will also remain at current levels until April 2026.
What was expected – and materalised – was a further extension to the stamp duty land tax (SDLT) ‘holiday’. So what else did the Chancellor Rishi Sunak announce?
Tax avoidance - Perhaps the most notable development is found in the new steps unveiled in the relentless drive to combat tax avoidance and evasion, including an additional £180m investment in 2021-22 to fund, among other things, new tech for HM Revenue & Customs (HMRC). Government wants to raise £2.2 billion by the year 2025-2026.
A package of measures to strengthen existing anti-avoidance regimes was also set out, with the intention of tightening the rules on tackling promoters and enables of tax avoidance schemes. HMRC’s information powers will be strengthened; they will be able to act more promptly where promoters fail to disclose their avoidance schemes under the Disclosure of Tax Avoidance Scheme and Disclosure of VAT and other Indirect Taxes regimes; and further changes to the General Anti-Abuse Rule (GAAR) will be made allowing it to be used as intended to tackle avoidance using partnerships
Also, penalties imposed on individuals who are sent follower notices as a result of their use of tax avoidance schemes is to be reduced to 30 per cent (down from 50 per cent) of the amount of tax in dispute. Then, where a tax tribunal decides the recipient’s continued litigation against HMRC is unreasonable, an additional 20 per cent will be charged.
Readers may be interested to note that the government has published a summary of responses to its recent consultation, Tackling Promoters of Tax Avoidance.
Personal and corporation tax – both the income tax personal allowance and higher rate threshold will remain the same between April 2022 until April 2026.
However, the rate of corporation tax will increase to 25 per cent from 2023, save for companies with profits of £50,000 or less. There will also be a tapered approach applied above £50,000 such that only businesses with profits of more than £250,000 will be taxed at the full 25 per cent rate.
SDLT – A further extension to the SDLT holiday to the end of June 2021 was announced, to the relief of an estimated 100,000 buyers who were trying to complete their residential purchases before the 31 March deadline. Also unveiled was a tapered approach to help with the transition from the ‘holiday’ to normal rules and avoid a ‘cliff edge’ effect for house buyers.
This means that, from 30 June, the nil rate band will be £250,000 until the end of September before coming back down to £125,000.
VAT – It’s worth noting a particular VAT-related announcement in the recent Spring budget, that the VAT cut to 5 per cent for the UK’s hospitality, accommodation and attractions businesses has been extended to 30 September. From 1 October to 31 March 2022, VAT will be charged at the reduced rate of 12.5 per cent
What’s the future?
Though no plans to reform either IHT or CGT were announced, it is expected that proposals are imminent. Many are anticipating a major overhaul lies ahead for both tax regimes. We will report on any such proposals and their implications.
If you would like us to cover an issue in the next NGM Tax Law Newsletter, we would be pleased to hear from you