After a delayed 2019 Autumn Budget, a snap general election followed by Brexit finally being pushed through on the 31st January (not to mention a recent Cabinet reshuffle resulting in a new Chancellor) it’s not be an easy task to predict what this fairly new government will announce in the Spring Budget.
There was not a great amount of detail on taxes or pensions during the election manifesto and with Boris Johnson having been in power for such a short time frame, it will be interesting to see what will come of the Budget. However, there could be a side-effect to the Budget which may undermine promising new businesses, which is to do with cuts to tax breaks for entrepreneurs.
Currently the £2.4bn a year tax break enables business owners to pay reduced capital gains tax when selling a company. However, the policy, which allows entrepreneurs to pay capital gains tax at the lower rate of 10 per cent instead of 20 per cent, has been criticised for being too generous.
Business owners that I have been speaking to are concerned about potential cuts to Entrepreneurs’ Relief in the Budget which have only been mentioned briefly since the election. Rather than highlighting the UK as a start-up friendly country, any cuts could stifle investment and undermine some of the country’s most promising new start-ups and entrepreneurs. Any dramatic changes would certainly hit SME owners who might have been planning for their retirement by taking the relief into account.
The Budget is also expected to target how businesses that qualify for Entrepreneurs’ Relief are defined, as the current policy also provides tax relief for big investors within businesses. Entrepreneurs’ Relief was capped at lifetime gains of £2m 10 years ago and then increased to £10m a year later under Chancellor George Osborne. From what we have seen, particularly in Manchester, it has certainly helped encourage entrepreneurship in the UK. Particularly, post-Brexit eliminating, it would certainly be a blow for the SME community – the devil is in the detail.
I’d expect that after three years of uncertainty and instability, the Budget should bring about a five-year agenda that will help both corporate and personal planning. Property has certainly been hit hard in recent years, and I expect there will be a review on inheritance tax (IHT), however I don’t think any immediate changes will be implemented.
One thing is for certain though, if we want to generate wealth in the UK, we need people to continue to invest and build businesses.
For more information about the impact of the Budget, find and contact your local Haines Watts office