Market briefing (no. 30) – 1st March 2021

Remembering an icon of our times

The weekend saw the funeral service for the 100-year-old Captain Sir Tom Moore.

He raised almost £33m for NHS charities by walking laps of his garden.

An Army veteran from the Second World War, six members from the Yorkshire Regiment carried Captain Tom’s coffin, draped in the Union Flag.

A true icon in these unprecedented times.

The Budget

It isn’t exactly known when an annual event known as ‘The Budget’ first took place. And it’s less clear when the Budget was first presented by what we now know as the ‘Chancellor of the Exchequer’. However, the phrase ‘Budget’ – which comes from an old French word for a little bag or purse – seems to have been first used when a UK Government ‘statement of revenue and expenditure’ was given regarding the Excise Crisis in 1733.

The 1733 Excise Crisis was caused by the then (and first) Prime Minister, Robert Walpole. He wanted to shift the burden of tax from the landed country gentry to those who consumed goods. In other words, he wanted to move the burden of tax from those who dominated the House of Commons, to the poor.

As would be expected, this caused significant vocal opposition. So much so, that the budget didn’t pass, and Walpole was forced from office nine years later.

By around 1753, the phrase ‘the Budget’ was beginning to be used.

Certainly, when George Grenville stood up on 9th March 1764 the annual statement known as ‘the Budget’ was well established(1).


Nearly 290 years since Walpole gave his speech, and over 250 years since Grenville gave the first recognised budget, this Wednesday will see the first UK Budget of 2021, delivered by Chancellor of the Exchequer, Rishi Sunak.

As usual, rumours are rife regarding the contents of the Budget. The Chancellor’s choices range from attempting to balance the UK’s budget, versus continuing to support the UK through its biggest crisis since the Second World War.

Whichever direction the Chancellor goes – and the two mentioned above are just two options – what we do know is that the impacts of Covid-19 are likely to be central to his announcements.

Later on, we will attempt to predict what will be in his Budget. However, a word of caution: Cristiano Ronaldo, the Portuguese and Juventus football player, is famously quoted as saying (regarding football), “there’s no point in making predictions. It’s not worth speculating because nothing is set in stone and things change all the time …” Likewise, with our predictions. Whilst reading below, please remember that one thing is for certain: we’re very likely to be wrong in our predictions and no pre-Budget changes to your financial circumstances should be based on them.


Rishi Sunak said on a popular Sunday morning politics programme(2) that his “priority is to keep supporting British families, businesses and people through this crisis. I said at the beginning I would do whatever it took to do exactly that, and I remain committed to that and you’ll see more of that in the Budget.”

He continued “that the right thing to do right now is to support the economy, but I also want to level with people about the challenges we face, Coronavirus has had an enormous shock both to our economy and our public finances and I think it’s right to be honest with people about that challenge and be clear about what our plan to address that is.”

In response to the interviewer’s question that the level of national debt is “economically perilous”, he said, “we went big, we went early and there’s more to come and people should feel reassured by that.”
He was challenged a number of times to declare some specifics but replied, “you’re asking me specific questions about tax… The Budget’s in just a few days’ time and we will talk about all of these things there.”

So, as he was reluctant to say anything specific, what could be in the Budget?

Please note the below refers to changes in UK matters. If the matter is the responsibility of the devolved parliaments, then the below will refer to changes in England only.

Income Tax

The Chancellor may set out plans to raise income tax by £6 billion as he sets out what he describes as a “pathway” to finding an extra £43 billion a year to plug an enormous gap in the country’s finances(3).

The Chancellor is likely to announce on Wednesday that for at least three years he will freeze the amount at which people start paying the basic rate of income tax; the personal allowance is currently £12,500. He is also likely to maintain the £50,000 level at which they begin paying the higher rate of 40%(3). Scotland has its own income tax bands and rates determined by the Scottish Parliament.

Although this sounds good, it will mean that before the next general election, which is due in 2024, depending on which source you reference, between 800,000(3) and 1.6 million(4) people may break into a higher tax bracket(3). This could also mean that by 2024, 800,000 people who are not currently paying income tax will be on the basic rate, currently 20%. Another 800,000 may also be moved up from the basic rate to the higher 40% rate(3).

Capital gains tax (CGT)

A rise in CGT may also occur. The annual tax-free allowance of CGT is currently set at £12,300. This could be reduced significantly, with some reports suggesting as low as between £2,000 and £3,000(4).
In addition to the annual tax-free allowance, last year the Office for Tax Simplification (OTS) outlined possible CGT rises by bringing CGT into line with income tax rates(4).

CGT is currently charged at 10% and 20% for most taxable assets, or 18% and 28% for residential property that is not a main home.

According to some national newspapers, the research done by the OTS could become a reality by the Chancellor bringing CGT in line with income tax. This could see a rise for basic rate taxpayers who would then pay 20% CGT, higher rate taxpayers paying 40% CGT, and additional rate taxpayers paying 45% CGT. Making these changes would potentially lead to significant cost increases for people selling on business assets, second homes and shares not invested via an ISA(4).

Stamp duty land tax

The housing market has been doing well over the last year. Partly fuelled by the Stamp Duty Land Tax (SDLT) holiday (intended to end on 31st March), but also some of those living in cities moving to the countryside. Many have bought larger properties, with room for a home office and outdoor space for those lockdown walks.

In December, the Government suggested the SDLT holiday would not be extended, which has driven fears of a ‘cliff edge’ situation. This suggestion includes some form of phasing out of the SDLT holiday so that sales that have exchanged but not completed by 31st March, will not be subject to any potential higher rates. According to some sources(3), the Chancellor may extend the holiday for another three months to the end of June.

VAT and business rates

During the 2020-21 financial year, business rates for companies in the retail, hospitality and leisure sectors have been waived.

VAT was also reduced from 20% to 5% for pubs and restaurants in July, running to the end of March.

There is pressure for these reductions to be extended to the end of the year.

Corporation tax

There could also be a rise in corporation tax. The Chancellor may increase the rate from the present 19% to 25%. Currently, the UK has one of the lowest corporation tax rates in the Organisation for Economic Co-operation and Development (OECD). Increasing it to 25% would bring it into line with other G7(6) countries(4).

Although the above would be seen as a large increase, the Chancellor may bring back the small profits rate to help small to medium-sized firms. Before it was stopped in 2015, this lower rate taxed smaller companies with turnover of up to £300,000 at 20% of profits(4).

Fuel duty

A ban was announced last November on sales of new, wholly petrol and diesel powered cars and vans, from 2030. It remains the intention to go fully electric by this date, but increasing duty on fuel could be challenging.

If they have had the option, many people have avoided public transport during the pandemic and have instead, tended to use their own private cars.

Some sources(5) have suggested the Treasury has considered a rise of up to 5p a litre from March. However, those same sources(5) suggest the Chancellor will now not make any increase.

And finally … Pubs

Whilst supermarkets have prospered during the pandemic, including being able to undercut pub prices, reducing alcohol duty for pubs would help them fightback and stem the tide in the tsunami of pub closures.

What should this tell you?

Irrespective of broader news, even headlines that discuss important national economic matters such as ‘The Budget’ and remembering that “past performance is no guide to future returns”, from an investment perspective, investors should have a balanced, longer term view.

As we have said before, we will continue to monitor the current financial situation and keep you notified of any changes that are made. If you would like to discuss how the current situation might affect you, then please seek professional financial advice to discuss your financial situation further.

26th February 1797 – Bank of England issues first £1 note(7)

28th February 1953 – Francis Crick and James Watson discover the chemical structure of DNA-molecule (double-helix polymer)(7)

28th February 1991 – Gulf War ends after Iraq accepts a ceasefire following their retreat from Kuwait(7)

1st March 589 – Future patron saint of Wales, Dewi (David in English) dies(8)

2nd March 1970 – White government of Rhodesia declares itself a republic(7)

3rd March 1991 – Los Angeles police officers severely beat motorist Rodney King which later leads to riots when the police officers are acquitted(7)

4th March 1994 – American actor and comedian John Candy dies(7)

5th March 1946 – Winston Churchill makes his ‘Iron Curtain’ speech in Fulton, Missouri, USA(7)

  1. https://historyofparliamentblog.wordpress.com/2012/03/07/the-first-budget-walpoles-bag-of-tricks-and-the-origins-of-the-chancellors-great-secret/
  2. BBC “The Andrew Marr Show”, 28th February 2021(http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/28022101.pdf)
  3. https://www.thetimes.co.uk/article/stealth-rise-in-income-tax-to-pay-covid-bill-9h7v2trl6
  4. https://www.telegraph.co.uk/business/2021/02/27/spring-budget-2021-rishi-sunak-when-announcement-date-time/
  5. https://www.theguardian.com/politics/2021/feb/24/rishi-sunak-freezes-fuel-duty-over-reliance-on-cars-in-pandemic
  6. The G7 countries are ‘The Group of Seven’ and are an informal bloc of industrialised democracies that includes Canada, France, Germany, Italy, Japan, the UK and the USA – https://www.internationalrelationsedu.org/what-is-the-g7-its-purpose-and-history-of-influence/
  7. https://www.onthisday.com
  8. https://www.visitwales.com/info/history-heritage-and-traditions/have-happy-st-davids-day-celebration

Issue 31 of the market briefing will be published on 15th March 2021.

This publication is marketing material. It is for information purposes only. This statement is for the sole use of the recipient to whom it has been directly delivered by their Foster Denovo Partner and should not be reproduced, copied or made available to others. The information presented herein is for illustrative purposes only and does not provide sufficient information on which to make an informed investment decision. This document is not intended and should not be construed as an offer, solicitation or recommendation to buy or sell any specific investments or participate in any investment (or other) strategy. Potential investors will have sought advice concerning the suitability of any investment from their Foster Denovo Partner. Potential investors should be aware that past performance is not an indication of future performance and the value of investments and the income derived from them may fluctuate and they may not receive back the amount they originally invested. The tax treatment of investments depends on each investor’s individual circumstances and is subject to changes in tax legislation.