Entrepreneurs may need to act before the budget
We expect a crack-down on Entrepreneurs’ Relief, pensions tax relief and possibly a mansion tax of some description to help the Government raise extra cash for the NHS, undertake projects in its newly won northern seats and maintain some fiscal headroom to counter Brexit and the impact of Coronavirus on the economy. This may be offset by some gesture politics around tax rates and allowances. However, we suggest that the asset rich and entrepreneurs should be preparing themselves for bad news, which may well come as a surprise to them in the first Conservative budget after a large election win!
Whilst no one has a crystal ball, our guess is that behind the scenes the Government is struggling to determine what the balance of its budget policies should be to address the competing tensions of:
- A desire to show austerity is over and therefore fund the NHS and other key government services well.
- The need to pay back the voters in the North who helped give the Government its majority.
- The fact that Brexit together with the impact of the Coronavirus may slow down the UK and world economy and therefore significant levels of government stimulus are likely to be required.
- The desire to remain the party of fiscal prudence and balance the books.
- The risk that policies which target the more affluent and entrepreneurial in society could be seen as an attack on the Conservatives heartlands.
The recent stock market volatility and growing concerns over Coronavirus mean the Government may well feel the need to keep some powder dry to address any slowdown in the economy, which will limit the scale of any possible giveaways. That, together with an inevitable increased focus on NHS funding as it prepares for a possible pandemic will generate more need to find cash for key government spending policies.
Whilst the Government will likely try to delay some of the pain by borrowing, arguing it is better to do this and then sort things out once the economy has stabilised, we can expect to see many of the well trailed revenue raising policies implemented. Expect to see reductions to, or the abolition of, Entrepreneurs’ Relief, pension tax credits and perhaps some form of mansion tax (perhaps through increased council tax bills). This may be offset by some gesture politics around tweaking the income tax rate or allowances.
At the end of the day the key thought is that with its large majority and distance from the next election, key advisors may well be telling the Government its least bad option is to target the asset rich and entrepreneurs. As such these groups may become the surprise losers in the first Conservative budget under Mr Johnson’s watch. These groups should therefore look to take advantage of unused reliefs, particularly Entrepreneurs’ Relief before the budget if possible.
At Calibrate Law we can help you to prepare for the budget – time is short but there are still actions that can be taken if you move quickly.
This paper is intended to be a brief note for clients and other interested parties. The information is believed to be correct at the date of publication but should not be relied upon as a substitute for professional advice. Please speak to a member of our team.