Changes to pensions and business taxes to encourage investment are predicted in the Budget this week, by a leading Kent business advice firm.

Chancellor Rishi Sunak is due to deliver his first Budget on Wednesday - although it is expected to be dominated by emergency funding to help fight the coronavirus outbreak.

However, accountants and financial advisors Kreston Reeves expect a host of changes to be delivered.

Daniel Grainge, partner and head of tax believes changes to Entrepreneurs' Relief are on the horizon after a pledge to review it in their manifesto prior to the December General Election.

Mr Grainge said: “I think that a wholesale withdrawal of the relief is very unlikely and would be disappointing given the government wants the UK to be a nation of start-ups and successful scale-ups.

“However, we may see some changes which limit its availability. In particular, the qualifying ownership period could be increased from its current 24 months, and a full-time working condition could be introduced to limit the relief to those working in the business.

“The current Capital Gains Tax rate was not protected in the manifesto, and so we could see an increase from its historically low rate.

“If Entrepreneurs’ Relief (ER) is retained, we may see the tests for Inheritance Tax Business Property Relief (BPR) being aligned with the ER rules.

"Currently, in order to qualify for ER a business must be at least 80% trading, whereas for BPR the test is at least 50%. If the rules were aligned it would become more difficult to qualify for BPR, particularly for those businesses with mixed trading and investment activities. Also, I would not be surprised if BPR on AIM-listed shares is removed.”

And he believes there could be further pension reform.

He adds: "It has been a few years since the last major changes to pensions and given the press coverage about the impact of the current rules on NHS consultants some changes are expected.

“Higher rate tax relief may be withdrawn to be replaced with a flat rate of tax relief. Alongside this, the tapered Annual Allowance could be changed or removed to prevent the tax charges on final salary schemes that that have hit the press.”

In the light of Brexit, the business advisor also expects to see a range of measures to encourage inward investment in the UK.

He concludes: "These could include more generous tax relief for research and development activities and extending the definition of qualifying R&D activities to include cloud computing and data. A reduction in the headline rate of Corporation Tax seems unlikely, but there may be further incentives to encourage investment to increase productivity and efficiency of the UK workforce.”

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