Simon Allister, Head of Wealth Planning
Eagle-eyed readers of the weekend papers may have noticed the most recent instalment of what is turning out to be a weekly round-up of speculation concerning the forthcoming Autumn Budget. Each year the Chancellor of the Exchequer makes the Budget statement to the House of Commons outlining both the state of the economy and the Government's proposal for changes to taxation.
After a reorganisation of the budget timetable, it is the one big fiscal event we now see each year. Having carefully navigated the initial lockdown period with various rounds of stimuli, the Chancellor himself, Rishi Sunak, has indicated he will need to balance the books. It is a question of timing. It is clear, through the leaking of various official documents, that Treasury officials are pushing for potentially significant tax rises.
These rises are likely to be broad-based, covering both personal and corporate taxation. It is impossible to know exactly what will happen although the same themes keep appearing. Budgets generally do not go by without some amendment to pensions' taxation. It is widely believed that this budget will be the one where full marginal rate tax relief finally ends. Similarly, the disparity between Capital Gains Tax and Income Tax stands out as an area that the Chancellor will look to address. Given the Chancellor's recent commission of the Office for Tax Simplification (OTS) to conduct a review of capital taxes, however, it would be a tight timescale to digest and implement changes in time for the Autumn Budget.
Perhaps the most provocative rumours are those relating to Income Tax and National Insurance Contribution rises, as well as the pensions triple lock. Any such moves would directly break the manifesto commitment the party made ahead of the 2019 general election. We have heard rhetoric around the perceived unfairness of National Insurance Contributions going back to Philip Hammonds' failed "white van man" tax in 2018. Going forward, we would expect employed and self-employed individuals to pay the same. There is also a chain of thought that we could see the biggest shake up of Inheritance Tax in several generations.
Whilst there seems to be an appetite in Whitehall for sizeable tax rises, what is less clear, is the appetite from the Chancellor himself to enact such changes and, if he were to do so, when they would apply. Rishi Sunak will be acutely aware of the fragile state of the UK economy and will not wish to be seen to do anything that could be deemed counterproductive. Indeed, the big news last Friday was the hint that we may now need to wait until the spring of 2021 for the Chancellor to deliver his address. Rumours triggered by the Chancellor requesting the production of official economic forecasts by the Office for Budget Responsibility – to be published in November - without any commitment to announcing any tax or spending plans.
The statement was seen as an indicator that the Chancellor is looking for "optionality" to delay if necessary. This seems very sensible with so many moving parts to consider. There is a strong chain of thought that now would be the wrong time to consider material tax rises. Given that the Government are acting from a position of relative political strength, it is conceivable he may elect for a series of delayed tax rises. This would allow people to acclimatise to the news before the real pain starts a short while later.
Given all of this uncertainty, we would not encourage anyone to make rash or irrevocable decisions based purely around speculation. That said, it makes sense to take a step back and give some thought as to how some of the rumoured proposals may affect you.
It would be prudent to overlay some of the speculation we have heard with more general planning around an individual's personal and corporate finances. Where, for instance, individuals were minded to consider gifting to their children, it makes sense to consider this sooner rather than later. Disregarding the prospect of changes on the horizon, giving some strategic thought to planning for the future should always be encouraged. When considered alongside what is likely to be around the corner, it makes it all the more important for individuals to plan in advance and methodically evaluate their personal finances. This being the case, they should be prepared for any eventuality.
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