Summer statement: economic outlook

Vanessa Lee, Tax Partner at accountancy and business advisory firm BDO, tells here how the Government’s longer-term recovery plan will be set out in the Autumn.

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The Chancellor announced the “Kickstart” placement scheme; an innovative measure to re-think entry level roles by subsidising placements for 16-24 year-olds in a very challenging jobs market with a quarter of the UK workforce furloughed.

This chimes with our recent poll, which showed that 72% of respondents felt boosting businesses and jobs should be Mr Sunak’s spending priority.

With the backdrop of the global economy facing a predicted reduction of 4.9% compared to a pre-Covid-19 growth rate of 3.3%, Mr Sunak has sought to support individuals and sectors most impacted by Covid-19, but also acknowledged the supply chains impacted by the changes.

There has been a reduction in Stamp Duty Land Tax Rates for residential property purchases in England and Northern Ireland to 0% for the first £500k of the purchase price, effective from July 8, 2020 - March 31, 2021.

This measure is encouraging for those looking to get their foot on the property ladder, or making their next move.

It is expected to help 90% of those looking to buy properties and will provide a £15k saving on £500k property.

With IHT changes not featuring and many struggling to get on the property-ladder, this reform may also benefit those who are able to draw on financial support from their families.

The VAT reduction from 20% to 5% was a hospitality and leisure focused change and is hoped to provide a significant boost in these badly affected sectors, but on review, implementation will be more complex than it appears.

Businesses more generally still need time to pay their VAT bills, particularly with the deferral end of June 30 and they remain fearful of wide scale redundancies when other measures are withdrawn.

The Government’s longer-term recovery plan will be set out in the Autumn.

It would be prudent to anticipate measures in the Budget to feature some tax increases to finance these changes.

These immediate proposals should help to provide some much-needed positivity on the back of renewed commitment to ‘level up opportunity across every region and nation of the UK by reviving cancelled or paused investment.

* Vanessa Lee is Tax Partner at BDO. She leads the Private Client Tax team across the North and the firm’s UK matrimonial team, email her at [email protected] or call 07796135824

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