POTENTIAL FUTURE TAX CHANGES
The UK Government, via HMRC, must maintain its revenue to fund infrastructure projects into the future. Whilst they may not directly increase the rates of ‘income tax’, there may be other ways to raise the money.
Here are some idea that have been floated in the tax community:
Personal allowance – this has increased steadily since 2010 (£6,475) to 2019 (£12,500). Despite the increase, the 2020 the allowance remains steady at £12,500, and it may stay that way. The problem with maintaining this is that it doesn’t provide any relief to taxpayers who need it the most
National insurance on employer contributions – currently employer contributions are an exempt benefit for NI purposes. HMRC may wish to introduce a tax on these contributions to be consistent with other benefits
Capital gains tax – current rates are 10% (basic ratepayer) and 20% (higher and additional ratepayers) (18% and 28% for residential property, respectively). They could be aligned with income tax such that the rates are 20% (basic), 40% (higher) and 45% (additional). This would also simplify the system.
Entrepreneurs’ relief – provided to those disposing a shareholding of more than 5% shares in a qualifying business. The qualifying period was recently increased from 1 year to 2 years. Perhaps the qualifying holding % could be increased, or the gain taxed at a less generous % (say, 12.5% instead of 10%).
CGT uplift on death – when inheritance tax is paid on the probate value of the asset, the benefactor of the asset is given to have acquired the asset at the probate value. In theory an asset may be exempt from inheritance tax thanks to the tax-free threshold, and the benefactor now owns an asset with a higher cost base – win-win for the taxpayer, lose-lose for HMRC.
Whilst we can only plan for what we know to be current tax law, it’s important to keep abreast on what happens in future. Where are you most exposed to changes, and are you ready to react in the face of the changes?
Contact firstname.lastname@example.org or phone 020 3746 1594 for more information.