The Chancellor, Rishi Sunak, has announced that he will present the Budget on Wednesday 27 October.
This Autumn Budget aims to outline his plans for the UK economy in its ongoing road to recovery from the COVID-19 pandemic. A spending review, delivered alongside the Budget, will also plan how much money each government department can expect to receive over the next three years.
With the unexpected increase to National Insurance announced recently and the majority of future tax legislation set at the Budget, many are wondering what surprises the Chancellors next speech may contain.
Will there be an increase on tax?
Guidance for the new health and social care reforms have already revealed that the Budget will contain further details on the 1.25 percentage point increase to employee and employer National Insurance Contributions, which also affects the majority of self-employed workers.
As of April 2022, the Prime Minister also announced that there will be an increase of 1.25 per centage point to dividend tax rates to fund the costs of social care and the NHS.
These measures go against the Conservative party’s pledge not to raise tax or National Insurance, and alongside the temporary suspension of the pension triple lock, suggest that the Government are taking a tough approach to balancing the books following unprecedented spending during the pandemic. This is something that will hopefully be clarified in the Autumn Budget.
However, Sunak has also pledged to commit more than £500 million in fresh funding to help people back into work as he seeks to stem the continuing turbulence of the coronavirus pandemic. Shifting the focus on getting people into new or better jobs, the Government comes under pressure over a major squeeze on living standards.
Nevertheless, the Chancellor seems somewhat constrained when it comes to raising taxation further, especially if he doesn’t want to damage the economic recovery that is now well underway.
This may mean that he targets other assets, not necessarily directly connected to the economy, with some experts suggesting a stealth wealth tax may be proposed that goes after Inheritance Tax (IHT) and capital gains.
IHT revenue has been rising fairly quickly during the last decade, driven by big increases in house prices, so the Chancellor could look at ways of maximising revenue through restricting reliefs and exemptions without altering headline tax rates.
At the same time, the removal or reduction of Capital Gains Tax allowances would only hit those disposing of valuable assets and would have a minimal impact on the day-to-day costs of running a business – although the sale of business assets of the company itself could be affected.
With a freeze on personal tax already in place until 2026 following the last Budget, the Chancellor could look to go further and target the pension allowance, an area where revenue could be raised by lowering the £40,000 annual allowance together with restricting other reliefs.
At the moment the Treasury is holding its cards close to its chest and many of the ideas being floated around are purely speculation. Despite this, businesses and individual taxpayers need to be prepared to adapt their tax plans quickly in light of any changes announced in the Budget.
For more information or advice on issues related to Budget, please get in touch with our expert team today.