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Spring Budget – Thoughts from our Tax Partner
21 Mar 2022
By Paul Brown, Tax Partner at WR Partners
Rishi Sunak must really be wondering who he upset in a former life… In his relatively short spell as Chancellor he has had to contend with Covid and a cost of living crisis which, if that is not enough, has recently been compounded by the horrific events in Ukraine. I imagine he must dream or preparing for a fiscal event which is not overshadowed by the latest global catastrophe…
So how to respond? Well, we will find out on Wednesday lunchtime when Mr Sunak delivers his Spring Statement. The usual speculation around tax changes has been relatively muted over the last few months so it is hard to get a real sense of just how much to expect from the announcement. Given my past record of predictions readers may want to assume that the complete opposite of what follows is the most likely outcome.
It seems pretty clear we are going to see a short term reduction in fuel duty to respond to the recent spike in pump prices. Of course the cynic in me thinks this is unlikely to give rise to significant reductions in the price of a lite of petrol or diesel. Is it just me or do price cuts seem to take far longer to flow through than rises which, despite forward purchasing of fuel weeks or months in advance seem to have an instantaneous effect? I do wonder whether, unless a reduction is accompanied by measures compelling the fuel companies to pass the saving on to consumers the reduction will just be seen as so much extra margin for the retailers…
The other elephant in the room is the National Insurance rise from 6 April along with its accompanying rise in dividend tax. As a reminder National Insurance rates and dividend tax rates will rise by 1.25% from the start of the next tax year, in preparation for the 2023 introduction of the full blown health and social care levy. Personally I find it hard to think of a worse time to be hitting consumers and businesses with a significant tax hike – I don’t doubt that the NHS and social care system need more funding but is it really sensible to be putting extra pressure on household and business budgets at a time when most costs (including interest rates now) are only going one way? It strikes me that downside of doing this far outweighs any benefits to the health and social care systems…
So what of the possibility of less globally focussed changes? This is I think the first fiscal event in many years where I have not seen a single piece of speculation about the impending demise of Business Asset Disposal Relief (“BADR” – the relief formerly know and Entrepreneur’s Relief). Does this mean there actually will be a change – are BADR’s days numbered? Will Capital gains tax rates rise? Will the sale of main residences suddenly become taxable? The honest answer is I have no idea but I would rather hope the Chancellor and his Treasury team have better things to be doing than making tax changes which, in the current context, would raise relatively miniscule amounts of revenue…
One idea to put out there – how about an enhanced tax relief for donations to charities who are actively supporting relief efforts in Ukraine? The government has already matched donations of up to £25 million to the Disasters Emergency Committee Ukraine Appeal which is absolutely to be applauded. Perhaps now supporting people who wish to donate with a little bit of a tax saving might be an effective way of driving additional financial support for those whose need is so great?
With the global backdrop being as it is my gut feeling is that Wednesday will be a relatively quiet day in terms of tax changes aside from the big ticket items around fuel duty and possibly the NIC rise. Of course the tax nerd in me would love a raft of detail changes to get my teeth into but less selfishly a very vanilla spring statement aimed solely at addressing the key issue of the day would seem to be the best of all possible outcomes – let’s worry about the detail when the world has returned to something approaching normality. Softening the impact of cost of living rises and supporting the people of Ukraine seem like much higher priorities in the short term…
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