Budget speech 2021. There was always going to be an announcement of further financial help for some taxpayers. And there was clearly going to have to be some extra tax found from somewhere. Detail will follow, but my first observations are these.
The following developments are welcome:
- There will be two further self-employed grants, SEISS 4 and 5, with taxpayers whose first tax return was the 2020 return now included. I am adding a link to information available so far under TAX LINKS
- The furlough scheme will continue until the end of September
- VAT on hospitality will remain at 5%, rising to 12.5% from October until next March
- Stamp tax concessions will be available until the end of September, which will help homebuyers.
- The enhanced (+ £20) Universal Tax Credit will continue for another 6 months.
- There is an attempt to weight the burden of rising tax onto large companies which have been profitable.
Less favourable points are:
- The long wait to claim SEISS 4, intended to cover February, March and April, continues. Claims will open in ‘late April’, no date yet. This will be giving HMRC time to update the system to accommodate 2020 return figures. But it will have been nearly 6 months from SEISS 3 in November by the time it becomes available.
- Aside from new traders, many others remain excluded. These include individuals who have been ineligible for SEISS because of profits over £50,000, agency workers, and those whose self-employed income is less than 50% of their total income.
- A freeze in the tax-free personal allowance and tax rate thresholds, which will stay the same from 2022 until 2026, does not immediately seem like a rise in tax. However effectively it is. It’s not as overt as the corporation tax rise for companies, but it creates ‘fiscal drag’, with the tax-free allowance not keeping up with the minimum wage, or with inflation. So people pay proportionately more of their income in tax as the years go by.
- The ‘super deduction’ enhanced tax allowances for businesses which are investing in new equipment are for companies only. They are not available to sole traders or to partnerships.
Overall, this continues the snowplough of various debt and deficit towards the short-term future. That is not a bad thing, within what is still an emergency situation. But there is some stealth in freezing future personal allowances as an alternative to raising personal tax rates. And although there was praise for the NHS, there was no financial ‘thank you’ for NHS workers who continue to bear the brunt of bringing us out of the health crisis.