and individuals through the financial impact of Covid-19. The latest estimates from the Office of Budget Responsibility (OBR) put the total cost of Government measures at over £190 billion, with the Job Retention (furlough) Scheme estimated to cost over £50bn, the Self Employed Income Support Scheme £15bn, Business grants and tax relief schemes £30bn, Business loans at a cost of £20bn and additional investment in health services, which is expected to exceed £31bn. Whilst the support measures may not have always reached everyone in need, it’s encouraging that we have one of the most comprehensive support packages in the world.
However, it is undeniable that the coronavirus outbreak and the public health measures taken to contain it have delivered one of the largest ever shocks to the UK economy and public finances. The OBR’s latest fiscal sustainability report predicts the largest decline in annual GDP for 300 years. There is forecast to be an unprecedented peacetime rise in the budget deficit, which will need to be recouped in the years ahead.
Returning the public finances to good health will be a financial juggling act for the Chancellor and it’s clear that as a nation, amongst the very many other aspects, we will certainly be managing the financial legacy of the outbreak for many years to come.
The Autumn Budget, which is usually held in October, will set out the Chancellor’s financial roadmap for how the economic impact of the outbreak will be addressed and, given the level of spending, it seems likely that sweeping tax changes and measures will be announced.
In his Summer Statement the Chancellor hinted at some of the changes he may look to make, including increasing national insurance rates for the self-employed, who are subject to lower contribution rates than those who are employed.
In addition, last month the Chancellor asked the Office of Tax Simplification to undertake a review of capital gains tax for individuals and smaller businesses, so this is likely to be another area subject to change, with Entrepreneurs’ Relief already having been drastically reduced earlier this year. Changes to tax relief on personal pension contributions have been anticipated for a number of years, and the sustainability of the Government’s triple-lock for state pensions is likely to come under pressure.
Given the potential for some significant tax changes in the Autumn Budget it’s worth consulting with your accountant to consider whether these changes could impact on your business or investment decisions now.