This Government has grappled with the largest deficit since World War Two and the need for a clear Covid recovery plan in this Budget. It is clear from the Chancellor’s speech yesterday that he has prioritised a short term recovery plan, which is welcomed by so many struggling UK businesses.
However, the UK needs tax increases of approx. £60bn if the Chancellor wants to start balancing the books. A fiscal plan will come and the Treasury’s decision to hold a “Tax day” in 3 weeks time on 23rd March will be where more details are uncovered.
We have put together a summary of some of the key measures, and will be sharing more detailed guidance throughout the month.
If you would like to have a conversation with one of our partners about how the budget will impact you and your business, please get in touch directly.
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What do you need to know:
Our take:
Toby Ryland, Corporate Tax Partner says:
“This rise in corporation tax will have a detrimental impact on SMEs. Large corporates have been relatively unscathed in the last year, whereas SMEs have suffered more acutely during the pandemic. A rise in corporation tax will be a further unwelcome hit to their bottom line.
“Despite a tiered system, the lowest band is so small that anyone other than the smallest companies are going to face significant tax rises.”
Commenting on the super deduction break, Toby adds:
“This tax break is very good news for businesses, designed to encourage capital expenditure by substantially reducing their upfront costs.
“Businesses can normally claim a tax deduction for expenditure on specific plant and machinery items of 18% per annum or 6% (for specific items such as air conditioning systems, water systems and electrical systems). This new allowance enables businesses to claim a deduction of 130% for most plant and machinery, or 50% for items that would only have qualified for the 6% rate.
“For example, an item that costs £100 will have an effective cost to the business of £75.30 – so the Government is funding almost 25% of the cost of the business’s capital expenditure.
“The ‘super-deduction’ only applies to items purchased between 1 April 2021 and 31 March 2023 – so businesses should delay any purchases planned for this month until 1 April 2021”
What you need to know:
Our take:
Russell Nathan, head of Hospitality said:
“All Covid support measures are a welcome boost for our struggling retail and hospitality businesses. Yet this package doesn’t go far enough. The majority of hospitality businesses have lost 60% of their annual profit in the last 6 months and this £5 billion restart grant only accounts for approximately £1,600 per employee in the UK hospitality sector.
Simon Michaels, Partner and CEO of HW Fisher Business Solutions adds:
“Cash flow is still tight for so many. We would urge all businesses to start thinking about a longer term strategy. It’s a difficult balance to strike, but addressing the cash flow dilemma is vital – not only will they be hit by the need to repay loans, pay loan interest and pay deferred VAT, they will also need to find additional funds for higher corporation tax.”
What you need to know:
Our take:
Jamie Morrison, head of Private Client said:
“This is a welcome move. There is currently an estimated 160,000 home sales stuck in limbo and at risk of falling through if the Stamp Duty holiday was not extended. At a time when the economy desperately needs a quick boost, stalling property investment is the last thing the UK needs.
“The economy needs to start moving and the Stamp Duty holiday will keep this the market stimulated – otherwise we are at a very real risk of stagnation.
“We would also like to see more inward investment in the housing market – one way to do this would be to abolish the 2% surcharge for overseas buyers. The UK needs to remain an attractive option.”
What you need to know:
What you need to know:
If you have any questions about how today’s budget might impact you, please get in touch.
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