The Spring Budget is a matter of weeks away, with the Chancellor Rishi Sunak due to deliver his Budget statement in the House of Commons on March 3. So far, he has kept quiet about the plans in the pipeline for the upcoming tax year.
The Chancellor replied: “Well, I think public finances are important and we’ve only been able to provide the support that we have because of a strong economy and strong public finances coming into this.
“And I want to make sure that whenever the next shock hits the country, that we can also respond in the same way.
“That will require our public finances to be put back in a strong and sustainable position.
“I’ve said I will always be honest and upfront with people about what exactly that means.”
Ahead of the Budget, a wealth of financial experts have been sharing their suggestions about what could be announced.
There’s no doubt businesses and individuals alike are hoping for a clear plan for economic recovery from the Chancellor’s announcement on March 3.
Melissa Geiger, Head of International Tax and Tax Policy at KPMG in the UK, argues that any initiatives are unlikely to represent systemic reform, for risk of damaging confidence.
“There is widespread expectation that taxes will have to rise to help pay down the country’s debt and invest in areas of public services such as the NHS,” she said.
“But economically the Chancellor also needs to spur on GDP growth and tackle the unemployment crisis caused by the pandemic.
“Tax increases will help the deficit situation but act as a drag on unemployment and GDP growth.
“Whatever the Chancellor chooses to announce on March 3 it will be a gamble but is also unlikely to represent systemic reform.
“Inevitably some structural reform is needed to steer us out of the current economic crisis, but the economy is probably too fragile.
“Provided the vaccine rollout allows us to emerge from the current pandemic over the summer with limited likelihood of a return to lockdown next winter, it is far more likely that we will see more sweeping tax measures in the Autumn Budget.”
According to Ms Geiger, the Chancellor may well make some changes to increase tax revenues at Budget, and she’s suggested this could include Stamp Duty, an online tax, corporation tax, and pensions relief reform.
She also suggested there are some tax changes which are likely to be deferred.
Reasons for this could be to avoid disrupting the economy in the short-term or to allow for more considered policy development.
Capital Gains Tax (CGT), Income Tax and VAT are among those which Ms Geiger suggested may be deferred.
Another is National Insurance – however there could be “small changes” announced to Budget, she suggested, explaining this potential move would impact workers who have reached state pension age.
“We might see some small changes; for example, imposing NIC on those that continue to work beyond the State Pension age,” said Ms Geiger.
“Inevitably, however, any changes to National Insurance would best be undertaken as part of a wider review of the taxation of work, ensuring that tax burdens are fair, and that the system works for modern ways of working.”