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The Budget 2017

Budget 2021

Eversheds Sutherland comments on the Chancellor's Budget and what it will mean in practice

The UK Chancellor of the Exchequer, Rishi Sunak, will present his Budget to Parliament on Wednesday 3 March 2021.

This will be the Chancellor’s second Budget, and the first since the Coronavirus outbreak locked down the UK, and will require a delicate balancing act between continuing to support individuals, businesses and the wider economy through the ongoing pandemic while looking to the future with measures that begin the difficult process of rebalancing the national finances.

There are limited levers to pull and opposing views, both economic and political, on whether such levers should be pulled. From a business perspective, an increase in corporation tax is looking increasingly likely. The UK’s 19% corporation tax rate is low compared to most developed countries and so an increase by several percentage points, perhaps spread over a period of years, may not be perceived as too damaging. The government may also seek to limit the impact of such a change on smaller, entrepreneurial companies through the increase in value of targeted tax reliefs and credits, such as R&D credits and patent box reliefs, or the reintroduction of a reduced rate of corporation tax for smaller companies.

For individuals, but strongly connected with entrepreneurial business, capital gains tax (CGT) is another tax that could be increased. There is currently a significant difference between the top rate of CGT (20%) and the top rate of income tax (45%) and arguments have been put forward for aligning these rates. Against this, there is recognition that the lower rate of CGT encourages entrepreneurial activity and investment. Some increase in CGT rates appears likely, but the details and timing of any such changes may be complex as a balance is sought between competing objectives.

It will also be the UK's first Budget as an independent country outside the EU for over 40 years. This presents opportunities for change to rules and regulations previously subject to EU overlay. Changes to VAT and other areas of the UK tax code may be included in the Budget, either as to raise revenue or increase the competitiveness of the UK going forward.

Check back to view further commentary on Budget 2021 as the details unfold.

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David Jervis, Head of Tax, International

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