Budget predictions: Furlough, wealth tax and VAT cuts

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We’ve had the roadmap – now we need the cash to get the East’s economy back on the right path. 

Here are our five predictions of policies we may well see in the chancellor’s budget on March 3.

  • Stamp duty

An extension to the stamp duty holiday is also being clamoured for by prospective homeowners and industries alike. 

In July, Rishi Sunak raised the stamp duty threshold to £500,000, a move which many have said has kept the housing market afloat. 

Nicola Lebish, senior associate and head of enfranchisement in the residential property team, at law firm Birketts said: “There is undoubtedly a need for the holiday to be extended so that all those people who have already found properties can move and benefit from the stamp duty saving. In addition, more and more contracts now include ‘Covid clauses’ which allow for a delay in completion should anyone in the chain be unable to move due to Covid-19. 

“Such a delay could take completion after 31 March which then penalises the parties who would otherwise have been able to complete. That will only prejudice existing transactions for parties who may well be unable to proceed due to lack of funds to meet the additional stamp duty liability.”

  • VAT tax cut extended for hospitality and retail

The requests are already rolling in from hospitality leaders to extend the current VAT holiday due to end next month. 

The charge has been lead by UKHospitality, an umbrella organisation which has seen more than 100 bosses ask for a deadline towards the end of the season. 

Nick Mackenzie, chief executive at Bury St Edmunds’ pub chain Greene King, signed the letter which read: “Extending the VAT cut until the end of the coming tax year will stimulate the economy and helping businesses to stay afloat, and, crucially, helping to boost consumer confidence.

“Government must also look at expanding the VAT cut to other products currently excluded, such as on-premise alcohol sales, leisure activities and weddings.”

  • Wealth tax

One of the ways to foot the virus bill could be a wealth tax, which has already been put forward by The Wealth Tax Commission.

This would be a charge to be paid by any UK resident (including recent emigrants) with personal wealth above a set threshold. 

The individual’s wealth would include main homes and pension pots, as well as business and financial capital, but minus debts such as mortgages.

However the researchers – from the London School of Economics and Warwick University – have drawn no lines in the sand as to where the threshold should be and how it should be paid. 

For context the paper – commissioned by the Economic and Social Research Council – lays out that, for example, a one-off payment on all individual wealth above £500,000 and charged at 1pc a year for five years would raise £260 billion.

In this situation such an individual – around eight million UK residents and a little over 10pc of the population – would pay £25,000 over the five-year period. 

But will a Conservative chancellor be brave enough to go down such a route? 

  • Continuation of furlough

The current furlough scheme is due to end in April but many businesses, particularly hospitality, will not be able to reopen by then. 

“Many firms have relied on furlough to see them through this difficult time so the sooner more clarity is given regarding the plan for when furlough ends, the better,” said Siân Llewelyn, solicitor at East Anglian law firm Prettys.

“Sadly, for some businesses, redundancies may be necessary.

“It is important employers take sound legal advice and, most importantly, plan ahead and give plenty of notice to any staff affected.”

  • Business rates extension

When questioned about business rates the prime minister dropped a hint: “Wait for the chancellor’s budget to explain exactly what we’re going to do.”

The emergency measure is also due to end at the end of March but the Labour leader Sir Keir Starmer has called for clarity on the matter as soon as possible. 

He said: “Hundreds of thousands of businesses are affected by this. Businesses don’t work as slowly as the prime minister – they need an answer now.”

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