UK Budget: The only way is up

The pandemic has prompted unprecedented UK government policy responses and has involved enormous and sustained public spending that has left the UK with public debt levels unseen for decades. Against the backdrop of a fragile economic the Chancellor has presented a Budget that sets out to support people and businesses, fix public finances, and build the economy. Debbie Lumsden assesses the main tax headlines and the impact for high-net worth private clients and businesses.

Debbie Lumsden,

Private Client Director at VG


The idea of a ‘one-off’ wealth tax to fill Treasury coffers appears to have been ruled out by the Chancellor for now, but possible changes to the existing wealth taxes, Capital Gains Tax (CGT) and Inheritance Tax (IHT) are certainly attracting attention and consultations are still to be published on 23 March.

It seems there may be gathering momentum for the Treasury to focus on the question of how to tax capital in the UK and possibly consider more radical reforms of the current tax system. Higher taxes on capital gains and inheritances would also respond to increasing concern that the UK tax regime favours asset owners over income earners and echoes Boris Johnson’s statement in last year’s election that “levelling up” would be a priority for his government.

Currently CGT rates are significantly lower than for earned income, which therefore allows clients to structure assets in a way that favours one tax over another. The Office of Tax Simplification’s first CGT report called for radical changes to the CGT rules, including increasing the CGT rates to align more closely with income tax rate; however, the Chancellor chose not to announce any major changes with respect to CGT and IHT and was silent on a number of initiatives that could be explored to raise revenues.

Whilst there is certainty under the current CGT regime, now may be the time to trigger disposals, settle assets into Trust and accelerate trust distributions before any such CGT increase becomes effective.

Debbie Lumsden,

Private Client Director at VG


As one of the most widely held asset classes for our clients, and one which has required creative thinking throughout the pandemic, any further changes to property taxes would significantly impact real estate investors.

As widely anticipated, the Stamp Duty Land Tax (SDLT) ‘holiday’ has been extended until 30 June 2021 meaning that domestic buyers of homes valued at up to £500,000 will continue not to pay any stamp duty on the purchase. Good news for homebuyers in England and Northern Island.

However, it is not such good news for foreign purchasers. A measure (as part of a raft of announcements made by the Government in 2019) that has received far less attention is the SDLT surcharge for foreign purchasers of residential property which comes into effect on 1st April 2021. It will see foreign investors pay an additional 2% on top of existing SDLT rates. It is yet another tax which affects UK residential property that applies to both non-UK resident individuals and non-natural persons e.g., companies trust and partnerships which clients and advisors will need be mindful of.

London's enduring appeal as a destination for international families means UK real estate remains an attractive investment for foreign investors but they should hurry if they wish to avoid the additional costs and complexity of the 2% surcharge.


In April 2023, the rate of corporation tax will increase to 25%. The rate will be tapered so that only companies with profits of more than £250,000 will be taxed at the full 25% rate. Companies with profits of less than £50,000 will remain at 19%.

The 25% rate will apply to all closely held investment companies (broadly a company which is under the control of five or fewer participators) regardless of profit, which leaves us asking if this is the first move towards targeting Family Investment Companies (FICs). Many clients legitimately structure their assets and wealth in corporate vehicles such as FICs which means that profits are subject to Corporation Tax instead of personal income tax rates, which can be more punitive. Such companies are often Jersey incorporated but UK tax resident as unlike the UK, Jersey does not have a public register of beneficial ownership which means that those companies, particularly those run/owned by private individuals and families, benefit from additional privacy but only if utilized for legitimate purposes.

Although the corporation tax rise may be considered steep in some quarters, the Chancellor Rishi Sunak pointed out that the UK still has the lowest corporation tax rate in the G7 meaning the UK remains attractive to foreign investors. The announcement of a "super-deduction" that will allow companies for the next 2 years to reduce their tax bill by up to 130% of the value of any investment made will also encourage foreign direct investment and is aimed at encouraging those clients and investors less impacted by Covid to invest their cash. As an example, shares in telecoms provider BT, which is in the process of upgrading its infrastructure, rose 6.4% on the back of this announcement demonstrating that there could be some real investment opportunities for clients.

A mixed bag

It was expected that the financial fallout from the pandemic (touted to be the fiscal equivalent of fighting a war) would represent the probability of a wealth tax in coming years to pay for the cost of COVID. On balance, it would be fair to say that some of the more punitive measures have not materialised, at least for now; Sunak warned that his hands were tied by the Conservative election manifesto of 2019, which pledged not to raise the rates of income tax, National Insurance contributions or VAT until 2024.

It does seem like the only way is up in respect of tax rates for individuals and businesses (although not immediately), however the 3 March 2021 budget also presents opportunities for investors. High net-worth individuals and businesses should take advantage of these opportunities and most importantly, take steps now to consider and plan their future structuring needs with certainty of current tax rates.

About the author

Debbie Lumsden, Private Client Director at VG, has over 20 years’ experience of managing client relationships as well as dealing with complex structures and transactions in a variety of jurisdictions for high net worth individuals and families. Debbie is passionate about building long standing relationships and understanding her clients’ needs to ensure they are met with optimal solutions for wealth structuring.

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