The 2021 Spring Budget is on the horizon
On 3 March, Chancellor Rishi Sunak will be delivering the year’s first major fiscal statement; an event that is already generating interesting discussions among financial pundits.
At the moment, it is still not known what type of budget the Chancellor is set on delivering.
Will the government announce fiscal stimulus packages to boost productivity and economic growth? Or will new tax reforms be announced to address the public debt which has increased substantially as a consequence of Covid-19?
Interestingly, rumours of a budget focused on substantial tax reforms are rising.
Chancellor Sunak has been clear on his intentions to simplify the tax system, and with public debt now at a record £1.2 trillion, the Spring Budget could be an opportune time for such creative measures to be introduced.
Based on current reports, it seems we could see an increase to corporation tax, as well the doubling of the capital gains tax rate. Business and investors are already voicing their concerns over such proposed changes.
On top of this, property investors and high net wealth individuals could also be subjected to a new tax linked to property.
Tax reforms on the horizon
Since last year’s spending review, there have been rumours of a one-off wealth tax to support recent state borrowing.
At the time, it was believed that the tax would be calculated based on the value of an individual’s properties, pensions and assets.
To gauge market sentiment towards this proposal, Butterfield Mortgages Limited commissioned an independent survey of 885 UK investors with portfolios worth over £10,000, excluding their primary property, pensions, savings and Sipps, in November 2020.
It found that 52 per cent of investors are opposed to the introduction of a wealth tax in the UK; this figure rises to 60 per cent among those with investment portfolios worth over £50,000.
While the latest news suggests a one-off wealth tax is looking less likely, it is now being speculated that the government could replace Stamp Duty Land Tax and Council Tax with a new property levy. This would be applicable to homeowners and calculated based on their value of their real estate portfolio.
At the moment, nothing is set in stone. The government is holding its cards close to its chest and is unlikely to give anything away until the Spring Budget is finally delivered.
Prior to the Covid-19 pandemic, the last few fiscal statements proved to be somewhat underwhelming. This was a result of the uncertainty and lack of progress surrounding Brexit negotiations.
The fact of the matter was that the government was not able to make big policy announcements until it was certain about the UK’s future relationship with the EU.