The Chancellor’s Summer Statement July 2020
When it was initially announced that a “mini-budget” would take place in July, there was understandable speculation that it would be used as a an opportunity for the Chancellor to raise some much needed revenue to reduce the deficit caused by the government’s Coronavirus Job Retention Scheme and other emergency measures which have been introduced in recent months to help curb the enormous economic impact of Covid-19.
However it soon became clear that Wednesday’s summer statement was aimed at boosting the economy and preventing further job losses, with the main focus on reigniting the ailing property market and resuscitating the stricken hospitality industry.
No immediate changes to income tax, capital gains tax or inheritance tax then, but one of the major headlines was the introduction of the “stamp duty holiday” with immediate effect, and which will remain in place until 31 March 2021. Broadly speaking, the government has raised the threshold over which stamp duty must be paid from £125,000 to £500,000 in an attempt to energise the housing market. Whilst there were already reliefs in place for those purchasing their first home, this emergency measure will be of great interest to those hoping to climb the property ladder, with the average purchaser set to save around £4,500 and potentially up to £15,000.
The autumn budget is still set to take place later in the year though, and with the public finances so stretched, it is almost inevitable that the Chancellor will need to introduce spending cuts and tax rises to fund the raft of measures which have been introduced in recent months.
Could pensions be in the firing line again? There is speculation that the Chancellor may pause the “triple lock” formula used to calculate pension rises. What about changes to inheritance tax, which has already been in the spotlight for long overdue reform? The All-Party Parliamentary Group for Inheritance and Inter-generational Fairness has already produced its recommendations for wide reaching reforms of what is widely regarded as a complex and unfair tax. Perhaps this will be the opportunity to introduce those proposed changes, although maybe it is more likely that further time for reflection will be required for such radical reform.
Whilst Wednesday’s statement was a good news story for many and will hopefully provide much needed stimulus to the economy, it remains to be seen exactly how the Chancellor plans to try and balance the books in the autumn.
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