As autumn arrives, the next Budget is not far away.
2020 will see something that normally only occurs when an election is imminent: two Budgets in one calendar year. The last Budget, on 11 March, now belongs to a different (pre-pandemic) era. Back then, the Chancellor Rishi Sunak announced £12bn of “temporary, timely and targeted measures to provide security and stability for people and businesses” in response to Covid-19.
But matters have moved on considerably since then. The latest estimate from the Office for Budget Responsibility (OBR) is that the direct effect of pandemic-related government decisions, in terms of increased spending and tax reductions, will amount to £192.3bn in 2020/21. Meanwhile the other side of the government balance sheet has been hit by lower tax receipts due to the recession.
So far, the Chancellor has won plaudits for his do-whatever-it-takes approach to supporting the economy, but the next Budget could be less well received as he begins to address the financial consequences of his actions. The current state of the UK economy, which shrunk by 20.4% in the second quarter of the year, makes it highly unlikely that Mr Sunak will reveal any significant direct tax increases in his Autumn Budget. However, he may well start the long process of book-balancing by reducing some tax reliefs and exemptions. As Parliament resumed in September, the Chancellor was already trying to quell backbench unease while simultaneously talking about “short term challenges” and a plan “to correct our public finances”.
There are several obvious revenue-raising candidates, about which the government is already in the midst of consultation: inheritance tax (IHT), tax relief on pension contributions, capital gains tax (CGT) and yet another review of business rates. Lurking in the background is the possibility of some form of wealth tax, although this might just be cover for the alternative of raising more revenue from IHT and CGT.
The date for the Budget had not been announced at the time of writing, although the present expectation is that it will be in November. Ahead of the Chancellor returning to the despatch box, it would be advisable to talk to your financial adviser about whether any plans you have – such as making a lifetime gift or realising capital gains – could be brought forward.
The value of tax reliefs depends on your individual circumstances. Tax laws can change.
The Financial Conduct Authority does not regulate tax advice.