After heavy hinting from the Treasury for some weeks, the expected Autumn Budget has been pushed into spring 2021, with tax rises on the cards.
Since the March Budget and through to August, the expectation was that the Chancellor, Rishi Sunak, would introduce his second Budget this autumn. Such timing would have restored the cycle of a Spring Statement followed by an Autumn Budget after it broke down last year in the lead up of the general election.
With intense speculation around tax rises to pay for the raft of Covid-19 support measures, the first serious clue to a possible Autumn Budget delay emerged on 8 September, when the Office of Tax Simplification (OTS) slipped out a statement about its review of capital gains tax (CGT), which had been commissioned by the Chancellor in July. The statement announced the response deadline on the technical part of the OTS consultation would be deferred by four weeks, to 9 November. This was a surprising move as the OTS CGT report was expected to feed into the Autumn Budget.
Soon after, the Chancellor himself issued a brief written statement saying he had asked the Office for Budget Responsibility (OBR) to prepare an economic and fiscal forecast ‘to be published in mid-to-late November’. The vagueness surrounding the timing was evident, as the OBR report is produced alongside the Budget and incorporates costings for Budget measures.
What had started to look inevitable was confirmed on 24 September when the Treasury cancelled the Autumn Budget. The Chancellor will still have a set piece event towards the end of the year; not only is there the OBR report to present, but Mr Sunak must also publish a Spending Review. The latter was also a victim of the general election and ought to have been produced a year ago to cover the three years from April 2020. Instead, the then Chancellor published a one-year Spending Round. Given the pandemic uncertainties, it is likely that Mr Sunak will take a similar short-term view, rather than introduce a multi-year plan.
The postponement of the Autumn Budget does not mean the spectre of tax increases has also evaporated. The level of government borrowing (£174 billion in the first five months of 2020/21) makes tax rises virtually inevitable. However, the Chancellor has afforded you more time to plan and take action in areas such as CGT and pension contributions.
Given the amount of Covid-19 financial assistance available, it comes as no surprise that there is an increase in HMRC-related scams this year.
What is worrying is that scammers have become more sophisticated; it is no longer a matter of simply ignoring emails offering tax refunds. Recent scams have targeted the self-employed receiving income support grants, and, with two further payments to come, the scams are expected to continue.
So what are the scammers after?
The holy grail for a scammer is to obtain sufficient personal information to access and empty a bank account. For instance, a Covid-19 goodwill payment may be conditional on providing bank details so the funds can purportedly be paid direct into the account.
As banks strengthen security, the focus of scams will shift to identity theft, especially where passport details are involved. Other scams may call for the payment of upfront fees to help claim a tax refund.
Moving away from emails
As scam email detection improves, many scammers have switched to text messaging. Telephone numbers are spoofed to show HMRC as the sender, with links to very convincing HMRC-lookalike websites.
Automated voicemails, voice calls and messages sent via social media are other means of making initial contact.
A bit of common sense will protect you from most scams, although the best ones can be quite convincing. Remember that HMRC will:
HMRC have published examples of phishing emails and bogus contact here.
Yet another extraordinary turn for 2020, normally seen only in an election year, will be upon us soon: the second Budget of the calendar year.
The last Budget, on 11 March, now belongs to a different (pre-pandemic) era. Back then the Chancellor announced £12bn of “temporary, timely and targeted measures to provide security and stability for people and businesses” in response to Covid-19.
To put it mildly, matters have moved on since then. The latest estimate from the Office for Budget Responsibility (OBR) is that the direct effect of government decisions, in terms of increased spending and tax reductions, will amount to £192.3bn in 2020/21. That is not the end of the story because the other side of the government balance sheet has been hit by lower tax receipts due to the recession.
So far, the Chancellor, Rishi Sunak, has won plaudits for his do-whatever-it-takes approach to support the economy, but the next Budget could be less well received as he begins to address the financial consequences of his actions. The current state of the UK economy, which shrunk by 20.4% in the second quarter of the year, makes it highly unlikely that Mr Sunak will reveal any significant direct tax increases in his Autumn Budget. However, he may well start the long process of book-balancing by reducing some tax reliefs and exemptions. As Parliament resumed in September, the Chancellor was already trying to quell backbench unease while simultaneously talking about “short term challenges” and a plan “to correct our public finances”.
There are several obvious revenue-raising candidates where the government is already in the midst of consultation: inheritance tax (IHT), tax relief on pension contributions, capital gains tax (CGT) and yet another review of business rates. Lurking in the background is the possibility of some form of wealth tax, although this might just be cover for the alternative of raising more revenue from IHT and CGT.
The date for the Budget had not been announced at the time of writing, although the present expectation is that it will be in November. Ahead of the Chancellor returning to the despatch box, you should review whether any plans you have – such as realising capital gains – need to be brought forward.
With the government announcing there will be no van benefit charge for fully electric company vans from 6 April 2021, you might be forgiven for thinking that having a company electric vehicle avoids any tax cost. However, this is not quite always the case.
You can currently be subject to a van benefit charge if you have the use of a company van which is also used privately. Unlike company cars, the definition of ‘private use’ for a company van does not include your normal commute to work.
Over recent tax years, the fully electric van benefit charge has been set at an increasing percentage of the full charge, and for 2020/21 it is 80% (£2,808) of the full amount. The exemption to be introduced from 6 April 2021 will apply in all circumstances.
Although fully electric company cars escape any car benefit charge for the current tax year, the percentage charge will be set at 1% next year, increasing to 2% for 2022/23. This will still make fully electric company cars very tax effective.
For a higher rate taxpayer, the monthly tax cost of a Tesla Model S, for example, with a list price of £96,000 will be just £32 in 2021/22 and £64 a year later.
For benefit purposes, electricity is not treated as a fuel. This means there can be no fuel benefit for a fully electric vehicle, even if the employer installs a vehicle charging point at the employee’s home or provides a charge card to allow access to commercial or local authority charging points.
However, a benefit will arise if the employee charges their company car at home and is then reimbursed in excess of the 4p per mile advisory electricity rate for business travel. However this advisory rate cannot be used for company vans.