The ii Budget Panel: your views on the chancellor’s plans

Our panel of interactive investor customers reveal their likes and dislikes following a seismic Budget.

The Budget yesterday was not as dramatic as some feared, but still a seismic event for taxpayers and homeowners.

Key announcements included freezing many tax thresholds until 2026, government-backed 95% mortgages and a rise in corporation tax.

We asked interactive investor customers on our Budget Panel what they thought of chancellor Rishi Sunak’s big reveal.

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Ian Luder, former lord mayor of London and ex-president of the Chartered Institute of Taxation

What did you think of the Budget?

Like all Budgets it was the proverbial curate’s egg for individuals.

True there was no immediate tax raid. Plus the fears of cuts to pension tax relief and the capital gains tax (CGT) exemption both proved unfounded.

A stealth income tax duly appeared with a miserly increase of just 0.5% in the tax-free threshold, and no actual increase in the width of the basic or higher-rate bands.

More of the same is promised for the next five years, with allowances and rate bands frozen until 2026, not only for income tax, but also for inheritance tax (IHT) and the lifetime pension fund allowance.

Assuming the Bank of England target for inflation is achieved throughout the next five years, the allowance will only be worth £900,000 in real terms by the time it is reviewed in 2026, or half the level at which it was originally introduced by Gordon Brown.

The £3,000 per annum IHT gifts allowance has remained unchanged since 1981, so will have been frozen for 45 years by the time it is reviewed.

More worryingly for savers is the fact that two allowances, frozen this year, have not been given certainty that they will even continue at that level until 2026. These are the CGT annual exemption, and the £2,000 dividend allowance.

All this increases the importance of maximising ISA contributions, which for 2021-22 at least remain at a relatively generous level of £20,000.

But the freezing of the lifetime pensions allowance changes the tax dynamic between pensions and ISAs.

Once someone has secured the maximum employer contribution into a pension scheme, careful consideration should be given as to whether ISA contributions of £20,000 should be made before further pension contributions.

Tom Mulligan, retired corporate finance expert, Kent

What did you think of the Budget?

If I summarise the chancellor's Budget, I will say that Mr Sunak has got it just about right for this year, combining the need for extended economic support with very modest and relatively pain-free personal taxation increases via the freezing of personal allowances. 

Although there are likely to be potentially negative consequences for jobs and inward investment, given the planned very large rises in corporation tax rates.

I was pleased to see that there were no changes to income tax, national insurance, or VAT rates and that the annual CGT allowance is being retained, although I can understand the arguments for a modest increase in these rates.

I was also pleased to see no mention of wealth taxes. At one level they are potentially a quick and popular fix. But ultimately the wealthy will avoid them, an awful lot of people who don't consider themselves wealthy would pay them and, critically, they would act as a massive disincentive to save and invest in the future.

Given that fuel duty disproportionately affects less well-off households I was pleased to see it frozen. Also, given the pain that the hospitality sector has suffered, I think that the alcohol duty freeze makes sense. But it is very difficult to argue against increases to tobacco duties.

I also liked the extension and tapering of the Stamp Duty holiday, as it avoids/softens the 31 March and 30 June ‘cliff edges’ and supports the positive knock-on economic consequences of increased consumer housing transactions.

So, in summary, I would regard this as a sensible Budget given where we currently are.

However, I do fully expect more substantial increases in personal taxation in the years ahead. The gargantuan cost of the economic support package and resultant government debt will have to eventually be repaid.

Tony Jackson, semi-retired academic economist, University of Dundee

What did you think of the Budget?

Overall, the Budget delivers what I was hoping for: a clear route-map for emerging from the pandemic which does not erect barriers to economic recovery.

The decision to freeze allowances on income tax at the level of the coming new tax year will mean that the Exchequer will gradually receive more revenue from this source as the economy improves. 

The hike in corporation tax planned for several years ahead provides businesses with time to adapt. It also lets them take advantage of the generous allowances now offered for qualifying investments, which can offset a significant part of this hike in tax.

Extending furlough and related assistance will provide a breathing space to recover momentum once the lockdown is lifted. The same applies to the decision to extend business rates relief.

The announcements relating to the establishment of government departments in northern English towns and the promotion of eight freeports across England seem sensible. The freeport initiative is a way for the government to demonstrate some payback from Brexit, and will certainly help some areas which have become economically and socially run down.

The one caveat I have is that there seems to have been another shift in the burden of taxation from central government on to local government, which will impact on the quality and cost of local public services.

Michael Byrne, Cheshire

What did you think of the Budget?

This is a crowd-pleasing ‘go for growth’ Budget.

I regret that the chancellor didn’t mention the NHS at all, but did manage to fund more STEM (science, technology, engineering and mathematics) capability going forward, which is good news and will inevitably lead to better treatments.

I wanted to see more help to build the green economy, and the chancellor delivered by setting up the new ‘green bank’ in Leeds. I’d still like to see a ‘polluter pays’ strategy to fund it, but Rome wasn’t built in a day. I asked for no big tax rises this year and he certainly delivered.

As I said – we need a Budget for immediate growth and this is it.

I asked for no wealth tax, and fortunately that didn’t appear.

I love the left-field ‘super-deduction’ allowing companies to get massive tax rebates for investment. Let’s see what behaviours it actually generates when we see the detail, but that helps the growth message significantly.

The Budget is clearly hoping that companies will pay for Covid-19 as that’s where the only significant tax increase came in – corporation tax. 

However, I’m not sure about the way it’s been done. You pay tax as a company based on your ability to pay it, i.e. the more profit you make, the more tax you pay. 

I guarantee that big companies that should pay the 25% corporation tax will just move more and more profit offshore because they have the resources to do so.

I still think that the economy should be allowed to re-balance sooner rather than allowing ‘zombie jobs’ to continue for so long – but at least companies are being asked to contribute to those jobs, so we should see the economy start to re-balance in the third quarter of the year.