The Pandemic’s Impact on Taxation 2021

Posted on 1st January 2021 by David Rudd

Calculator and an alarm clock

The increase in government spending last year has called for most of us to wonder if there will be tax changes this year and if so, in what areas.

In the spending review issued towards the end of last year, Chancellor Rishi Sunak detailed government spending for 2021. With government borrowing expected to be at a high, an increase in budget cuts/freezes and higher unemployment rates, the Chancellor warned of an economic emergency. It has been reported the UK will suffer the worst economic decline in 300 years. 

The state of the economy is therefore causing a lot of uncertainty around future tax rises, however, we speculate there will be both personal and business tax rises in order to put money back into the government and economy. 

In this article, we will be discussing the tax areas we suspect the government will be reshaping in 2021, our predicted changes and how you can prepare your accounts accordingly. 


Were tax rises discussed in the Autumn Budget?

Each year the Treasury’s annual UK Budget is released in Autumn and provides an update on the government’s economic and spending plans, including tax changes. 

Tax rises were expected to be part of the Autumn Budget; however, due Covid-19 causing extra government spending the Autumn Budget was scrapped. Speaking on the cancelled Budget, the Treasury said: now is not the right time to outline long-term plans – people want to see us focused on the here and now.” 


Has anything replaced the Autumn Budget?

There was a Summer Economic Update delivered in July last year by the chancellor to protect the UK economy during the pandemic. The plan for jobs supported jobs and businesses by introducing the following:

  • Eat out to help out scheme
  • Stamp duty holiday
  • VAT cuts for hospitality and tourism sectors
  • Kickstart employment scheme
  • Job retention bonus
  • Worksearch, skills and apprenticeships boost
  • Green homes grant
  • Public sector and social housing decarbonisation
  • Infrastructure package


Since then, Rishi Sunak has introduced the Winter Economy Plan which includes a new job support scheme, an extension of the self-employment income support scheme and government loan support for businesses.  

However, the Autumn Budget has not been replaced and we are still expecting a new Budget this year. We are hoping for a Budget announcement in the Spring and in the meantime, we are expecting ad hoc announcements from the government. 


What will the next Budget include?

Due to the increased spending last year and the increased spending detailed for this year, there will have to be an examination of the tax system for the economy to recover. We are therefore expecting a rise in taxes which we predict will happen in various areas such as corporation tax, capital gains tax, insurance premium tax, class 4 national insurance and pension tax relief. 


Corporation Tax

It has been reported that the chancellor is considering a 5% increase in corporation tax taking it from 19% to 24% – which is in line with the global average. This is expected to have a significant impact on smaller companies if introduced. We predict this rise will come into effect. 


Capital Gains Tax

The Office of Tax Simplification published a report, towards the end of last year, for an overhaul of capital gains tax including raising capital gains tax rates closer to income tax rates. It is likely capital gains tax rates will therefore increase. In particular further increases to Capital Gains Tax on residential property are expected.


Insurance Premium Tax

We predict there will be an increase in Insurance Premium Tax from the current 12%. In November, HM Revenue and Customs called for a consultation on proposals to improve the operations of Insurance Premium Tax.


Class 4 National Insurance

We predict in Class 4 National Insurance, which is set at 9% for most people, to 12%. It is likely this move will be made to bring it in line with Class 1 National Insurance. The chancellor may justify this move as a response to the support self-employed people received from the government during Covid. 


Pension Tax Relief

The government has decided not to review the impact of pension tax relief as it has carried out a number of consultations in this area. However, we think it is possible the government may restrict tax relief for higher and additional rate taxpayers. 


In addition to the above, there have been calls for the chancellor to introduce new taxes too. Last year, Deutsche Bank proposed making employees pay a 5% tax for each day they work remotely which could raise £7bn. 


What does this mean for Steven Burton & Co clients? 

Although these are only predictions, our clients should expect an increase in one or more tax areas. We expect the discussions around tax will start early this year in order to assist in the recovery of the economy. As nothing is set it stone yet, we want to warn our clients about future tax rises and will continue to share updates when they happen.

Many accountants offer little tax saving advice, and many of those that do only offer basic and last minute tax planning. Steven Burton & Co offer a Pre-Year End Review, taking place 3 months before your year end, giving you a more realistic and measured timeframe to implement our advice. If you’d like more information on how your personal and business accounts could be affected, get in touch with us.

David Rudd

David is an Accountant with over 15 years’ experience in helping a large number of different business owners in numerous sectors from consulting agencies to every area of construction you can think of.

At home dealing with numerous different types of accounting software from Xero to QBO and everything in between.  David is always on the lookout for new technology to help business owners to create more time for themselves and their teams.

With a healthy ambition of never resting on the results of yesterday, David is at his best when working with ambitious business owners who want to improve their businesses for eventual sale.

In his spare time, David is often found cheering on his two boys at football, building Lego (which he pretends is for his boys) or watching the latest TV series on Netflix.

Learn More

Built on cloud accountancy:

Get in touch

Our friendly customer service team are on hand to help with any queries you may have.

    We'd like to occasionally send you communications via email to keep you up to date with the latest company information. Please confirm if you would like us to contact you by checking yes or no below. You can unsubscribe at any time.

    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

    LENA James
    LENA James
    We moved accountants to specifically follow David a number of years ago and have completely changed the running of our business for the better, through planning ahead we have managed to change our circumstances with an over drawn loan account and corporation and tax bills outstanding to a strategically run method of being able to clear the over drawn loan account and balance our other tax liabilities with advice and support from David We continue to be supported and take advice from his expert knowledge and guidance going forward and would highly recommend the Steven Burton team for your Accountancy needs.
    Great service. Helpful and friendly people.
    Vince Strafford
    Vince Strafford
    We moved our accountancy needs to Steven Burton and Co - specifically with David. It’s been night and day compared to our previous provider - we now have a partner who is helping us to develop our business and in a way that means we have long term security. Local, accessible and responsive - everything we need in a company that provides business critical services.
    The team here are fantastic - every detail thought of and explained clearly. I have no hesitation in recommending Steve and the team to any business, be it fledgling or established. You get what you pay for and more.
    Jo C
    Jo C
    The team at Steven Burton & Co have been lovely to work with, helping us with our partnership accounts over the last couple of years. They are always on hand to answer any queries we have and are happy to explain in as much detail as we require. Everyone we have spoken to has been polite, welcoming and extremely knowledgeable and we look forward to continuing to work together as our business grows.
    Sam Nagle
    Sam Nagle
    A truly fantastic accountants. Unlike any other accountants we have had in the past. They are 100 percent on the ball, helpful with fantastic advice. Not just sound accountancy advice but advising the business as a whole in various areas. Strategic quarterly reviews to really delve into the business to make sure profit margins are where they should be, and if they aren’t, they’ll look into improvements that can be made. Nothing is too much and the phone lines are always open for advice. Unlike most accountants their focus isn’t just on completing your annual accounts and not seeing you again for another year. I cannot praise the team enough for all the hard work they put in! They really have shifted our focus onto the aspects of the business that we were perhaps neglecting!
    Steve Lincoln
    Steve Lincoln
    The team at Steve Burton & Co provide a first class personal service to their customers. They support business owners through every step of the life cycle of their business, adding true value with their relationship.
    Toby Ishmael
    Toby Ishmael
    I work closely with the team at Steven Burton & Co. to assist their clients with a range of services and I can't speak highly enough of the professionalism and care that they demonstrate for their clients.
    Darren Vass
    Darren Vass
    I've worked with Steven Burton & Co for almost 4 years and I cannot fault their service. Dominique in particular is always available for advice and guidance whenever needed.
    Makala Balls
    Makala Balls
    The team at Steven Burton are friendly, professional and really get to know their clients so their advice is tailored to suit their individual needs. Cuts through all the jargon and offer clear and timely advice. Would highly recommend.