Another area where we could see change is pensions tax relief – particularly for high earners. However, fears that cuts to pension tax relief may discourage saving means any changes in this area are likely to affect a very small group of higher earners
What about inheritance tax? One of the Conservative’s manifesto pledges was that a couple (married/civil partnerships) should be able to pass on £1m without their children having to pay IHT. This is now in place through the use of two nil rate bands of £325,000 each and the residential nil rate band of £175,000 each.
However, IHT is still not safe from further changes. Although IHT generated a record £5.2bn in tax receipts in 2018/19, receipts slipped 4% last year. This fall might encourage further tinkering to ensure receipts keep climbing. IHT is certainly an area to watch.
The UK’s corporation tax rate is lower than many other advanced countries in Europe. This relatively low rate has made the UK an attractive and competitive place for foreign companies to do business. The Government may feel that there is room to raise the rate, but it would damage our post Brexit credentials as a good place for foreign companies to locate.
What about the fuel pump? Changes to fuel tax are unlikely to have an immediate impact if many people are using cars less due to increased homeworking, so this might be more palatable. There are also emission targets to reach and encouraging petrol/diesel owners to move across to electric may be a motive here.
Capital gains tax could be raised, so the tax on shares is in line with that charged on property gains. Alternatively, Rishi Sunak may even raise both, so they are at the same rates as income tax.
Income tax may also be targeted, we have been at 20% and 40% since 2008/09. The 50% rate lasted three years between 2010/11 – 2012/13 when it was replaced thereafter with a 45% rate. Research has shown that small increases to headline rates, such as income tax would generate the largest increase in tax revenue for the government.
So, what should you do with this information?
Take your time. You could end up worse off by attempting to pre-empt an announcement and paying tax later is preferable to paying tax now. It is also important to keep in mind that anything could change, so maintain a close eye on the latest updates.
We have every reason to hope that the COVID-19 bill will be spread over a long timeframe, rather than seeing any abrupt tax lifts, so that the economy has time to recover.
If you are concerned about how any changes may impact your personal circumstances, get in touch and we will help you consider your options.
- Bowmore Financial Planning Ltd is authorised and regulated by the FCA
- The Financial Conduct Authority does not regulate Estate Planning or Inheritance Tax Planning
- Bowmore Financial Planning is not regulated to provide tax advice.