2017 Budget Easy Tax Targets
We take another look ahead at the potential budget losers and gainers next week. The country needs greater revenue ahead of an economic slowdown as we head towards Brexit and a potential ‘no deal’ Brexit at that.
Stamp duty increases, restricting mortgage loan interest expenses relief to offset against income tax on rents received and no capital gains tax reductions on 2nd properties have had their desired impact with more landlords moving away from buying property releasing more onto the market for purchasers. That said, first time buyers still struggle and as we have seen in the past, we see first time buyers potentially benefitting from a concession on stamp duty say up to £150,000 purchase.
Personal allowance to rise as committed to at £12,500 but wouldn’t it be easy to keep the higher rate tax threshold frozen at £45,000.
Currently dividends are taxed within Basic rate tax band at 7.5%, Higher rate tax band at 32.5% and Additional rate tax band at 38.1%. How easy would be it to increase basic rate band dividends tax to say 13.8%, the equivalent of National Insurance rates meaning there is no difference to business owners earning money through PAYE compared to low salary and dividends.
Maybe a watered down version of last year’s ‘u-turn’ increases on National Insurance rates, they are clearly already on the government’s radar. The self -employed do not pay as much in National Insurance but equally do not receive the same benefits.
It is not commonly known that financial services products and insurance do not have a charge to VAT. Whilst HMRC may not want big finance companies to be VAT registered, could it be an increase to insurance premium tax and bank levies or indeed a new ‘financial service tax’? Doubtful, but always possible.
Pension Tax Relief
An increase in tax relief for younger savers and reduction for older savers? We already have restrictions in the yearly amount that you can pay into pensions, the Annual Allowance at £40,000 pa (which reduces with tapering for higher earners to just £10,000pa). In addition, the Lifetime Allowance, the maximum you can build up in pensions in your lifetime is currently £1m. Could we see marginal changes in these to increase revenue. This is quite an easy change to implement.
An Offshore Wealth Tax?
Some countries tax you for holding assets outside the UK even if you do not realise any income or gains. Currently, UK only taxes you if you actually realise that income or gains. This again is a very easy tax to implement.