Rishi Sunak may have only been Chancellor for four weeks, but he has certainly started with a bang. Rarely do you see such a significant spending plan with very little in the form of tax measures to pay for it. It would appear clear that the Chancellor is going to be using the very low interest rates currently available and borrow to fund, because the annual net cost of the measures announced amount to £42 billion by 2024/25.
The backdrop of the coronavirus outbreak meant that the Chancellor immediately had to address what the government was going to do to assist businesses and the NHS. This came in the form of a £30 billion package of measures including:
- statutory sick pay for those who are advised to self-isolate, even if they are not displaying symptoms;
- business rates for shops, cinemas, restaurants and music venues with rateable values below £51,000 suspended for a year;
- a £500 million hardship fund to be given to local authorities to help vulnerable people in their areas;
- fiscal loosening of £18 billion to support the economy this year, including £5 billion to the NHS and other public services;
- a temporary coronavirus business interruption loan scheme, for banks to offer loans of up to £1.2 million to support small and medium-sized businesses; and
- meeting the costs for businesses with fewer than 250 employees of providing statutory sick pay to those off work due to coronavirus.
Whilst the growth forecasts have been downgraded, the Chancellor stated that, due to the additional investment being made in light of the coronavirus outbreak, the forecasts are 0.5% per annum better than would have been the case without it.
Further spending promises came for road, rail, housing and broadband projects that could, in total, come to in excess of £600 billion.
On the tax side, the giveaways kept coming, with the national insurance contributions tax threshold rising from £8,632 to £9,500, the abolition of VAT on women’s sanitary products, to come in from 1 January 2021 and a freeze on beer, cider, wine, spirits and fuel duty, even though the Chancellor stated they could no longer afford to continue to freeze fuel duty!
He also confirmed some of the giveaways that had previously been announced, including an increase in the structures and building allowance from 2% to 3%, an increase in the R&D expenditure credit from 12% to 13% and an increase in the employment allowance from £3,000 to £4,000, but only for businesses with less than £100,000 employer’s NIC in the prior year.
And then came the less positive news, with the entrepreneurs’ relief allowance reducing from £10 million to £1 million, the same rate as on its introduction in 2008, with immediate effect. Buried in the detail are anti-avoidance rules that block schemes that sought to crystallise the tax point of disposals prior to Budget day.
Pensions continue to be tweaked, predominantly because of the impact the rules have on surgeons and consultants, who are reluctant to take on extra shifts, because of the punitive tax they end up paying. As a result, the thresholds at which the £40,000 pensions contribution is tapered have been increased by £90,000. However, the allowance will now taper down to £4,000 from 6 April 2020, rather than the £10,000 that currently exists.
A new surcharge of 2% for stamp duty land tax will apply for any non-UK resident acquiring UK properties, but the additional monies raised from this measure are to be ring-fenced to tackle rough sleeping.
It was always going to be a challenge for the Chancellor to put together a Budget amidst so much economic uncertainty and it is perhaps not a surprise that his tax measures are relatively light touch. However, the books will have to be balanced eventually, which may well result in additional tax raising measures in the future.