All eyes were on the new chancellor Rishi Sunak today as he delivered his debut Budget — the first since October 2018 and one set against a backdrop of growing economic uncertainty and a spreading public health crisis.
The long-awaited plan was somewhat overshadowed by the economic shock seemingly about to be caused by the coronavirus, which triggered the Bank of England to slash the base rate this morning (March 11). Measures to mitigate the downturn dominated the chancellor’s speech.
Borrowing forecasts for the next five years rose significantly, starting with an increase from 1.3 per cent of GDP to 2.1 per cent in the current tax year, partly due to the cash boost to tackle the crisis. The backdrop was a UK economy that this morning was revealed to have shown stagnant GDP growth of zero per cent over the past three quarters.
Both the short-term and the long-term, then, were in the chancellor's sights - and there were plenty of measures of relevance to advisers, too.
1 £30bn to help curb the virus
Mr Sunak announced a package of measures to provide a bridge for businesses to make sure the temporary coronavirus did not “become permanent”.
He pledged a £2bn cash injection for small businesses, promising to refund the cost of providing statutory sick pay to any business with under 250 employees impacted by the virus.
HMRC has been asked to "scale up" its Time to Pay service, allowing businesses and the self-employed to defer tax payments over an agreed period of time, and the Treasury will introduce a "temporary coronavirus business interruption" loan scheme, which will see banks offer loans of up to £1.2m to support small and medium sized businesses through the disruption. Sick leave rules were also relaxed.
2 Taper tweaking
With NHS staff in the spotlight now more than ever, the chancellor also unveiled plans to raise the point at which tapering of the annual allowance kicks in from £110,000 to £200,000 as of next month.
This move means anyone with income under £200,000 will not be affected by the controversial taper, which has seen doctors ditch overtime to avoid a hefty tax charge.
The chancellor said this will take 98 per cent of consultants and 96 per cent of GPs out of the taper altogether.
Others have accused the Treasury of “tinkering”, calling the Budget a “missed opportunity” to scrap the whole thing.
3 Taking back
But the government is taking back some money itself. Mr Sunak slashed entrepreneurs' relief, limiting the tax break available to those selling their business to £1m over a lifetime (down from £10m).
The Budget also announced extra funding to support HM Revenue & Customs crackdown on tax avoidance, which the chancellor said would create an additional £4.4bn in revenue over the next five years.
The Treasury is also set to probe the quality of tax advice, threatening to penalise financial advisers found to have promoted tax avoidance schemes. It will also launch a review into the VAT treatment of fund management fees as the first part of a wider look at the UK funds regime, though tax hikes here are unlikely.