UK & Europe
Our tax experts share their initial reaction to Chancellor Rishi Sunak’s budget and what the real estate sector need to know.
The Chancellor's budget speech yesterday was focussed on supporting the UK's recovery from the COVID pandemic. Although the Government will be withdrawing existing support schemes, this comes alongside significant investment to encourage growth. UK borrowing has now reached a peacetime record of £355bn this year (our national debt is now in excess of £2.3 trillion - over 100% of GDP). The bill for the Government’s unprecedented spending on the COVID crisis is going to have to be paid and tax rises were expected.
The speech was against a background of a fall in GDP for 2020 of 9.9%, the largest fall in 300 years and the largest decline in the G7 nations. The Chancellor announced that the success of the UK’s vaccine programme means the UK can now chart a clear course out of lockdown. As a result, the Office for Budget Responsibility expects the economy to recover quickly when restrictions are lifted and grow by 4% this year and over 7% in 2022.
Despite the flurry of transactional activity in the run-up to the budget over fears of a hike in capital gains tax rates, this is the dog that did not bark. Indeed, the Chancellor made clear there would be no immediate increase in the rates of income tax, capital gains tax, National Insurance contributions or VAT. However, this is not all it seems since the Chancellor said he would freeze the current thresholds for income tax, capital gains tax, inheritance tax and pensions allowances – in effect, increasing tax in coming years by the back door.
Some of the announcements most likely to be of immediate interest to those of us operating in the real estate sector include:
As more information emerges over the next few weeks, we will give further updates. In the meantime, if you have any questions or would like to discuss any of the announcements further, please don't hesitate to contact the article authors or your usual Clyde & Co contact.