The Budget brought a few surprises but was broadly in line with expectations according to the Herald’s expert panel.
Johnston Carmichael’s Tax Partner and Head of Corporation Tax John McAuslin, Financial Planner at Johnston Carmichael Wealth Peter Nutini and the Herald’s Business Editor Ian McConnell joined host Kim McAllister to discuss the implications of the Chancellor’s announcements.
“The extension of the support schemes for the pandemic beyond the lockdown to September allows people to plan and that planning has been very welcome,” John said, adding that the big surprise came in the form of the ‘super-deduction’, which allows businesses to invest in assets and qualify for 130% first year capital allowance.
“It’s fantastic in terms of encouraging businesses that have done well during the pandemic to actually spend that money and spend it faster,” he said.
From a financial planning perspective, Peter said the freeze on tax thresholds was very pertinent, following the rise this April. The threshold will increase to £12,570 and remain at this rate until 2026.
“There were a lot of rumours beforehand, one of the ones for us was the potential for capital gains tax rates to move into line with income tax rates, that would have been a big negative for savers and investors, so that was a nice surprise that that didn’t happen,” Peter said.
Watch the full panel discussion here:
“The pension lifetime allowance was also frozen, where it was due to increase with CPI by about £6000. This will save the treasury about £250m per year. It’s disappointing, a lot of savers for retirement need consistency and there’s been constant tinkering with pensions over the years. Seek advice on how to mitigate if you’re approaching the limit of just over £1m”
John said it was a Budget focused on protecting jobs and livelihoods while strengthening and fixing public finances.
“Corporation tax rising to 25% from 2023 is quite a jump and higher than anticipated,” he said.
“It’s going to bring in about £47b to the Treasury over the three years following 2023. It’s important to note that businesses with profits less than £50,000 will remain at 19%.
25% is still quite low compared to the rest of the G7 and the developed world. The UK was starting to be seen as a bit of a tax haven, so it might encourage some larger businesses globally to invest even more.”
The most hopeful news came in the adjusted projections for economic recovery and unemployment levels. Growth is predicted to be 7.25% in 2022, up from the previous forecast of 6.25%, while unemployment rate will be 5.6% in 2021.
Ian McConnell said these were crucial, along with the corporation tax threshold of 19% for profits up to £50,000.
“Smaller company reliefs are important up to a relatively high level of profit, it won’t hit struggling businesses. Investment relief looks interesting as well, by and large given where we’d gone from the previous crisis it seemed a kind of obvious area to go for. The numbers are very big in terms of raising revenues,” he said.
“The extension of the furlough scheme is also good news. There was a problem over autumn with lack of visibility on the scheme, since then there’s been an improvement. September seems kind of reasonable given the roadmap, the one thing to keep in mind is like last summer you’re seeing an increase in employer contribution too.”
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