An opportunity lost?

An opportunity lost?

Peter Disney, of Colchester-based accountancy frim, Wood and Disney, offers his verdict on the Budget.

To be honest unlike most accountant I don’t often get excited about budgets but I had high hopes that this one would be different.

Yes of course the Chancellor had to continue with various support so as expected the furlough scheme has been extended, Business Rates have been cut or reduced and hospitality vat continues at its low rate of 5%. There has even been an extension to the Self Employed grant although with some restrictions.

This was perhaps the biggest opportunity in decades to revamp and overhaul our tax system to bring it into the 21st Century; to make fundamental changes rather than the usual “tinkering” we see which simply makes matters more complex and open to abuse.

However, it is always easier to criticize so I will quickly summarise in as few words as possible the key messages that came out of this budget from a tax perspective.

Get to the end of the Pandemic:

  • Furlough scheme extended to September with businesses starting to contribute from July.
  • SEIS scheme will continue until September.
  • Universal credit uplift extended until September.
  • The temporary reduction in VAT to 5% for Hospitality and Tourism extended until September and then 12.5% until next year when it will revert to 20%.
  • Stamp duty holiday extended until June.
  • Business rates holiday until June then a discount of 75% until March 2022.
  • Restart grants for non-essential retailers of up to £6,000 and up to £18,000 for leisure and hospitality.
  • Government backed Recovery Loan Scheme to replace the CBILS and Bounce Back Loan Schemes.

Reliefs and Give Aways to Encourage Recovery

  • To provide much needed cash flow, loss relief carry back extended to three years but capped at £2m.
  • To encourage investment in Plant and Equipment (restricted to limited companies) there will be increased capital allowances until 31 March 2023 representing 130% deduction from profits (not 130% deduction from tax as some newspapers seem to think).
  • Eight new freeport sites announced with enhanced capital and building allowances.

Paying for the Pandemic

As far as I am concerned this is the “big one” perhaps not so much for me at my age but unless a firm grip is taken on this my children and perhaps their children will be paying for this for decades to come.

Two elements to the changes. The first is known as Fiscal Drag. Freezing allowances and thresholds and let inflation nibble away over a period of time. And physical tax increases.

Fiscal Drags:

  • Although the personal allowance will be increased from £12,500 to £12,570 it will then be frozen until 2026 effectively bring an extra one million individuals into the tax net.
  • The higher rate threshold will also be increased from £50,000 to £50,270 and then frozen until 2026.
  • The VAT threshold will remain at £85,000 until 2024.
  • Inheritance Tax Nil Rate Band remains the same
  • Capital Gains Tax annual exempt amount remains the same

One Tax Increase:

Poor old Corporation Tax takes the brunt with increases from April 2023 on the following levels of profit.

Up to £50,000                                  19%

£50,001 to £100,000                      20%

£100,001 to £150,000                    21%

£150,001 to £200,000                    22%

£200,001 to £250,00                      23%

£250,001 upwards                          25%

Missed Opportunities

Why is someone on minimum wage paying tax and NI? Why is someone on less than the living wage paying tax and NI?  Why does NI start at a lower income than tax?  It makes no sense and adds complexity with little benefit. Set the personal allowance at a realistic level.

National Insurance is just a tax like any other but creates massive problems such as the whole IR35 fiasco. It disproportionately impacts on different sectors of society and on the different ways people take their income.

Business owners moan that Employers NIC is a tax on expansion as it increases their costs when taking on new staff. The self employed moan that if they miss a small amount of class 2 NIC it impacts on their pensions despite being the tiniest of NI costs. It is not fit for purpose and should be abolished and merged with income tax. Then what we are paying is transparent and fair whichever way you earn your income.

There is actually no good reason why income and capital gains should be taxed at different rates. Capital gains are already taxed at the same rates as corporation tax rates within limited companies.

Did the Chancellor really “level with us”? I agree that now is not the right time to raise taxes but arguably it is the right time to start to reform of our complex and antiquated tax system.


I would hate to be the chancellor. Whatever he does he will upset someone, but he has missed probably the biggest opportunity in history to make some dramatic changes to the tax system and on the whole most people would accept that they were necessary following extraordinary circumstances. I don’t think any chancellor will get this chance again.