The first budget in more than 18 months will be revealed tomorrow and the speculation as to what it will include is widespread. The government has previously promised that the Budget will ‘level up’ and ‘unleash’ the UK economy. The first Budget of any new Parliament – especially where they won a strong majority – gives the new Chancellor the opportunity to be bold despite only being in office less than a month.
With Brexit in progress, this first budget as a non-EU state should be focussed on initiatives that are going to drive the growth of the UK economy but with the growing concerns around Coronavirus and the impact on economic forecasts, it will be interesting to see how Rishi Sunak responds but it will be inevitable that it will now form the context upon which his Budget is formed.
What should we expect?
With the increasing threat of coronavirus damaging economic growth, the chancellor could be faced with a constraint on funds in the future. Pulse Cashflow believe the budget will focus on securing the economy with plans as to how we respond to the public health concern as well as supporting businesses and the economy. We shouldn’t be surprised if some initiatives are pushed back to a future budget.
Pulse Cashflow calls on the Chancellor to deliver a business-friendly budget focused on three key areas.
Firstly, his budget needs to tackle the ongoing business rates issue. The high cost of business rates has become unsustainable for many businesses with regional differences seeing businesses outside London paying a disproportionate amount. They need support to overcome what has become a major cost to business and one which is causing the failure of both small and large businesses.
Secondly, the Tory manifesto vowed to review and reform entrepreneurs' relief - a £3bn tax break that reduces Capital Gains Tax for people selling their business. It had been expected that the Budget would cut entrepreneurs’ relief – a tax break that allows company owners to pay less capital gains tax (from 20% to 10%) when selling their businesses. However, it is rumoured that the Chancellor is keen to promote investment and may recalibrate it instead – perhaps only aiming it at small businesses. We believe that Entrepreneurs need to be encouraged to set up businesses, manage and invest in them and in doing so benefit from the sale of that company as a reward for creating jobs and wealth – potentially to another entrepreneur who will continue investing. It could destroy the retirements of thousands of business owners who were relying on the sale of their businesses to fund their retirement.
Thirdly, we are calling for a review of the proposed IR35 tax rule changes. The Government is rushing through reforms which tax experts and business associations alike are warning will be damaging to business. With global competition for talent and changes to how we employ skills from the EU, it is essential that UK businesses have access to a flourishing and flexible workforce. We must not at this time be putting rules in place which makes working in the UK a restrictive place. Up to 170k individuals are likely to be affected across 60,000 businesses.
And finally, the country needs bold action on developing skills, innovation and infrastructure it we are to encourage a surge in investment to make the UK an attractive trading partner.