The next Budget is due in Autumn 2020, late October or early November. Although it is wholly possible that this may be postponed until Spring 2021, especially if we have a further spike in coronavirus cases.
We are already seeing the usual pre-Budget speculation that taxes will be increased to pay for COVID grants and support. However, putting aside the economic arguments for and against, now is a good time to consider what tax planning adjustments we make now. In this blog post we take a look at some of the areas where good planning could work to your advantage.
- Corporation tax. It has been rumoured that corporation tax will be increased. At present Corporation Tax is 19%. It could be increased up to 24%. If implemented this will be a significant increase.
- Income tax. No reported changes to income tax (yet!) but be watchful for regional variations as Scotland and Wales now set their own income tax rates and tax bandings.
- Capital Gains Tax. There is a rumour that the Chancellor is considering aligning CGT rates with income tax rates. If enacted, this could potentially double tax payable on capital gains.
- Pensions tax relief. Speculation that income tax relief – especially for higher rate income tax payers – will be reduced for pensions contributions has been rife for a number of years.
Strategies to beat the possible budget changes
The following strategies could be considered:
- Advance income streams. If you can organise work-flow to advance the billing and completion of billable projects and supplies before 31 March 2021 – assuming CT rates do not increase until 1 April 2021.
- Defer revenue expenditure. If you can defer expenditure that you would normally treat as a business cost – without prejudicing your overall business plans – then it makes sense to incur these costs after 1 April 2021.
- Defer capital expenditure. As with the previous point, if you can defer capital expenditure on new plant, vehicles or other equipment then it makes sense to incur these costs after 1 April 2021.
- Review pension contribution 2020-21. If tax relief is to be reduced following a budget announcement it may make sense to maximise relief for 2020-21. Speak to your financial adviser or pensions adviser to discuss your options.
Planning is imperative
Basing tax planning decisions on speculative announcements, especially as these may be motivated by political considerations, is clearly unwise unless there are other compelling reasons for doing so. Clearly any changes you consider should make commercial sense as well as hedging your bets!
We all have unique business and personal financial circumstances, and these must considered before undertaking any tax saving strategy. We therefore advise that you speak to us in order that we can consider all your options. Please do not act upon or refrain from acting upon any matters discussed in this article without seeking professional advice.
Please contact us on 020 7330 0000 to speak to a member of our tax team today.