FT Money: Budget experts have their say

Rishi Sunak spared entrepreneurs this time round in the Budget after hitting them 12 months ago with a £900,000 tax grab when he cut entrepreneurs relief from £10m to £1m.

For now, capital gains tax (CGT) was left alone — against the recommendations in a review by the Office of Tax Simplification last year. Entrepreneurs will breathe a huge sigh of relief, many of whom were panicking to rush through business sales or even leave the country at the thought the 20 per cent CGT rate could be aligned to 45 per cent income tax.

Sunak also confirmed that he would freeze the capital gains annual exemption at £12,300 until April 2026. The OTS had suggested cutting the amount to between £2,000 and £4,000, which he has chosen to ignore.

Entrepreneurs should not rest easy just yet, however, as the autumn Budget is likely to be the real tax grab. With the triple lock constraining what Sunak can do, restraint on CGT could well fall under the sword. In my view, the CGT story is to be continued.

The chancellor knows the value of branding and just how high “green” investing has moved up the radar, with his announcement of a green retail savings bonds to be offered by National Savings & Investments (NS&I) this summer.

This investment product will be closely linked to the UK’s sovereign green gilt framework, which will detail the projects that will be financed via green gilt issuance in 2021 to the tune of a minimum of £15bn.

Giving retail investors the chance to buy into the government’s so-called “green industrial revolution”, this is a clever way of unlocking the extra cash sitting idly in bank accounts, money saved by those who have managed to keep their jobs and are no longer paying for the daily commute, holidays and the like.

Despite Sunak describing these as “world-leading”, it’s not a new concept: the US, Germany, France, China and the Netherlands already issue similar bonds. The government is clearly pushing to enhance its green credentials ahead of the COP26 climate summit in November and capitalise on growing investor interest in assets designed to fund environmentally friendly spending.

While the bonds offer an alternative to cash rich investors looking for better returns, the size, price, yield, term and structure is yet to be determined. With inflation alarms ringing amid increased money supply, these green bonds will need to be comparatively attractive should interest rates rise. That said, NS&I bonds have always tended to be a Isa and pension allowances.

The designation of eight areas as freeports – which benefit from a range of very generous tax incentives to stimulate economic activity – may significantly impact the property market. Residential property near freeports may see higher demand, leading to higher rents and values. But areas of the country that lose business activity to these special economic zones may equally see values and rents of residential and commercial properties decline.

I think there will be plenty of property investment opportunities arising from freeports but also plenty of unintended losers elsewhere. Existing and aspiring property investors need to do their homework to ensure that they are on the winning side of this initiative.

I was pleased to see that Social Investment Tax Relief (SITR), which gives generous tax treatment for investment into social enterprises, will be extended until April 2023. Investing in charity and community interest backed companies might help alleviate any personal increase in tax while also doing socially useful things

While it was anticipated that the personal allowance and income tax thresholds may be frozen, the freezing of the pension lifetime allowance measure is more surprising and may contribute to more savers becoming disillusioned with pensions.

It will have a particular impact on medium and higher earners who have been in defined benefit pensions — typically in the public sector — for many years, not least doctors and teachers.

Last year the chancellor raised the threshold at which the pension annual allowance is restricted, specifically in response to complaints by the medical profession who were adversely affected if they increased their working hours.

The announcement of an increase in corporation tax to 25 per cent in 2023 was headlined as only affecting companies with profits in excess of £250,000 with those generating profits of up to £50,000 retaining the current 19 per cent rate.

In a look back to years gone by it appears to exclude close investment holding companies, which will impact investors who moved their buy-to-let property portfolios into companies in order to benefit from the full deduction of loan interest against income.