Economic recovery could delay tax rises
Christopher Hope reports that Treasury ministers hope that the economy will start to recover by mid-2021, delaying any consideration of significant tax rises until the following year. He says senior ministers want to ensure the worst of the coronavirus pandemic has passed before considering increasing taxes, adding that this realistically pushes any large-scale increases to March 2022 at the earliest. A senior Treasury source told the paper that people would have to wait “a bit longer” than the spring Budget to see whether tax increases are required. Meanwhile, a poll by ORB International for the Sunday Telegraph shows that 38% of people agreed that tax increases should be used to pay for the pandemic, while 31% disagreed and the remaining respondents were unsure.
IFS warns on likelihood of tax rise
The Institute for Fiscal Studies’ (IFS) analysis of Chancellor Rishi Sunak’s spending review warns that Conservatives will face calls to break manifesto pledges not to increase taxes, with a larger than expected £40bn public finances black hole identified. IFS deputy director Carl Emmerson commented: “If you want to raise large sums in a relatively straightforward way, the obvious thing to do is to push up the standard rates of income tax or national insurance or VAT, and indeed if we look at past fiscal consolidations that involve tax rises under Labour, Coalition and Conservative governments it has often been the rate of national insurance, or VAT they have reached for, so I wouldn’t be surprised if that was a part of a tax raising Budget.”
Source: The Daily Telegraph (26/11/2020) The Guardian (26/11/2020)
1.3m Britons set to delay tax returns
A new survey shows that more than one million people plan to put off tax returns and risk having to pay £130m in fines to HMRC. While tax returns must be filed by January 31 2021, almost 30% of those polled said the coronavirus crisis had made them more likely to put off dealing with their tax return. This equates to around 1.3m of Britain’s 4.5m freelance taxpayers. It was found that three in ten would wait until January to file their tax return, with 45% of these taxpayers planning on leaving it until the final week of the month and 6% planning to file on January 31. Those who miss the deadline face a £100 fine.
Source: The Daily Telegraph (02/12/2020)
CGT take climbs as Sunak mulls reform
Government figures show that HMRC pulled in £72m in capital gains tax in October, marking a steep increase on the £4m recorded in October 2019. With analysts suggesting that the levy could be set for reform as Chancellor Rishi Sunak looks to help foot the nation’s coronavirus bill, it has been suggested that the take from the tax may have spiked due to people selling assets out of concern rates could rise in 2021. It has been suggested that CGT rates could be increased to align more closely with income tax, with the Chancellor considering the outcome of an Office for Tax Simplification (OTS) report on CGT he commissioned. The OTS suggests a rethink of CGT could raise £14bn for the Treasury.
Source: Daily Express (01/12/2020)
One-in-4 SMEs had little or no savings before pandemic
A poll by Nucleus Commercial Finance shows that a quarter of SMEs had little or no savings before the coronavirus outbreak, while fewer than two in five believe they have enough money to see them through the rest of the crisis. The survey of more than 1,000 small business owners shows that most believe their businesses will be affected by the pandemic for up to 16 months. Nucleus Commercial Finance CEO Chirag Shah said: “The effects of the pandemic have clearly had a significant impact on the UK’s SMEs. Not only has it brought about operational challenges, but the loss of income has been devastating for them.”
Source: Daily Express (01/12/2020)
SME confidence climbs
A poll by Hitachi Capital Business Finance saw 55% of SMEs say they are borrowing to finance their 2021 plans, a two-percentage point increase on a year ago, while more than a quarter are predicting growth over the next three months, up from 13%. Hitachi Capital Business Finance’s head of insight, Joanna Morris, said: “Despite a bruising year for small business in the UK, confidence levels are starting to return among some sectors, not far off levels we saw before the pandemic outbreak.”
Source: Sunday Express (29/11/2020)
Amazon backs charity’s support for small firms
Amazon has signed up as a donor to the Tide Charity, which will provide grants of £1,000 to businesses hit hard by the pandemic. The charity, a partnership between small business bank Tide and the Federation of Small Businesses (FSB) has raised just over £200,000 since the Mail helped to launch it earlier this month. John Boumphrey, UK country manager at Amazon, said: “These grants will help companies most at risk and provide access to much-needed funds.”
Source: Daily Mail (28/11/2020)
£600m of debt repaid in October, while mortgage borrowing hits 13 year high
Bank of England data on lending shows that households repaid £600m of debt in October, the same as in September. This means the total repaid since the end of March now stands at £15.6bn. Credit card debt has fallen by 13% over the past year, with consumers having reined in borrowing amid ongoing uncertainty around the impact of COVID-19. The Bank of England figures also show that 97,500 home loans were approved by lenders in October, meaning mortgage approvals are now at the highest level since 2007. The Bank said approvals for home loans were more than 5,000 higher than in September and a third higher than in February, the month before the UK entered its initial coronavirus lockdown. October’s total marks a steep increase on the low of 9,400 recorded in May. Mortgage borrowing hit £4.3bn last month.
Source: The Guardian (01/12/2020) The Times (01/12/2020)
OECD: UK economy to contract by 11.2%
The latest economic outlook report from the Organisation for Economic Cooperation and Development (OECD) suggests the UK’s post-pandemic economic recovery will lag behind every other major economy, bar Argentina. The OECD report forecasts that the UK economy will contract by 11.2% this year, with this steeper than the 10.1% fall in GDP it predicted in September. The OECD also downgraded its forecasts for UK growth to 4.2% in 2021, from 7.6% three months ago. The OECD said that, alongside the coronavirus crisis, Brexit poses a threat to growth, suggesting failure to secure a trade deal with the EU would see “serious additional economic disturbances in the short term” and have a “strongly negative effect on trade, productivity and jobs in the longer term”. Overall, the OECD said the global economy is set to shrink by 4.2% this year before rising 4.5% in 2021 and a further 3.75% in 2022.
Source: Daily Mail (02/12/2020) The Independent (02/12/2020) The Guardian (02/12/2020) City AM (02/12/2020)