Rishi Sunak’s Budget will encourage higher earners to consider their “international financial options” and will drive businesses away from the UK, warned Nigel Green, CEO of one of the world’s largest independent financial advisory and fintech organisations.
In his budget speech, Sunak emphasised the impact of the COVID-19 pandemic on the economy, with 700,000 people losing their jobs, the British economy shrinking by 10% (the largest fall in 300 years), and the highest borrowing outside wartime.
The 2021 budget expects unemployment to peak at 6.5% (from a previous estimate of 11.9%) and that the budget deficit to reach GBP 355 bln, or 17% of GDP, the highest level in peacetime).
“The Chancellor has got an extraordinarily difficult hand to play as he tries to stem the economic damage caused by the pandemic, support jobs and businesses and, crucially, rebuild the public finances,” the chief executive and founder of deVere Group said.
“Whilst Mr Sunak is being hailed a hero for the continued and unprecedented levels of support, it should also be remembered that he is – in a stealth move – dragging more people firmly into the tax net,” he warned.
“He is raising taxes under the radar.”
Freezing personal tax thresholds
Green said that although there is no income tax rise, the Chancellor is freezing personal tax thresholds, meaning that as incomes rise and thresholds don’t, he is able to raise money by fiscal drag.
Earlier, the deVere CEO noted that those most impacted by this stealth move will be looking at the financial planning options available to them, including international options, in order to grow and protect their wealth.
Rishi Sunak also confirmed that corporation tax will increase to 25% from 2023, up from the current level of 19%.
Of this tax hike, Green explained that “lower corporation tax helps job and wealth-creating business to survive and thrive. It also helps attract business to move and invest in the country.
“Instead of increasing taxes, Mr Sunak should have relentlessly focused on growth and stimulus policies for businesses. This would have been of greater help to firms, the economy, jobs and, ultimately, the Treasury’s coffers.”
“Again, this corporation tax hike is likely to serve as a prompt for businesses to consider their overseas financial options.”
The deVere CEO concluded that “the Chancellor had to perform a tough juggling act. But stealthily dragging more people into the tax net and raising corporation tax might have negative, unintended consequences for the Treasury’s bottom line.”