Tax Thursday, today, sighs, with a significant degree of relief that Rishi kept it positive and reassuring yesterday.
Those of us braced for potentially painful tax rises were largely surprised and pleased to be spared from most of what we feared. Even the headline Corporation Tax increase (which will rise to 25% from April 2023) was sweetened with some encouraging mitigators (including a deferral of that rate increase until 2023, a retention of the 19% rate for small companies earning £50,000 profits or less, and a useful temporary extension of the carry-back rules, from one year to three). All-in-all, it was quite a motivating and supportive experience. Whatever political affiliation you might hold, it’s impossible to deny that the Chancellor is good at this spectacle, and canny how he plays it.
The start of Rishi’s speech majored on all the pandemic financial support measures. By and large these are scheduled to carry through to the end of September, a date when most of us are surely hoping and believing that we might be out of the restrictions, thanks to the extraordinary speed of our vaccination programme. The furlough arrangements, self-employed grants, extended support for low income groups, new re-start funds for business, new loans, continued Business Rates holiday, continued low VAT rates for hospitality and tourism, etc, all presented a clear statement of continued care and a willingness to take this right up to the perceived end. Even the 0% SDLT threshold on residences goes on, holding the line at £500,000 until 30th June and phasing down with a threshold of £250,000 to 30 Sept, before it returns to “normal” at £125,000 from 1 October 2021.
Tax measures are not, as indicated above, extensive yet, even though the Chancellor’s message was a clear and open warning about what needs to come in due course, after so much has been done to keep us afloat. One very important reward for this ongoing avalanche of public spending, he said, is reflected in the OBR’s forecast of peak unemployment, revised down now from 11% of the workforce, to just 6.5% – a nice sound-bite to comfort those of us who otherwise wince at the extent of the borrowing. Total fiscal excess for this year and next will burst through the £400billion mark at a record 17% of the UK’s net income. The Chancellor did not venture as to when this might all be paid back – that might have spoiled the mood.
There was time, space and even more fiscal scope to capture our imagination with “super deductions” (up to 130% tax relief for eligible capex on plant and equipment), with “freeports” (look out for increased employment at East Midlands Airport, Felixstowe, Humberside, Liverpool, Plymouth, Solent, Thames and Teeside), and much reference to “Green Growth” (although a tad light on clarity in relation to this). There was also teasing reference to making both R&D tax relief and our favourite share scheme, EMI, “internationally competitive”. I wonder what that can possibly mean; the sceptic in me suspects that this might have been designed mainly to cement the warm feeling already achieved by that late stage in proceedings.
It all felt very reassuring. Good coaching, perhaps, to lift morale for the last push to the freedom we crave. Tax Thursday is pleased that the UK has been allowed this temporary reprieve from the taxes which must surely come – but only, thankfully, when we might be out of intensive care and getting stronger.
Download our handy Budget Summary for a full round-up of the changes, as announced on 3 March 2021.
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