There is much speculation on what the Chancellor Jeremy Hunt will announce in the coming Budget on 17th November 2022 as to what will be done to balance the UK books and fill up those block holes in UK debts. Quite simply, we believe the Treasury will go for the ‘lowest hanging fruit’.
Potential Lowest Hanging Fruit That May Face Tax Changes:
Frozen Tax Allowances that could easily be extended beyond 2026
- Inheritance tax £325,000 nil rate band and the private residence nil rate band £175,000.
- Personal allowance of £12,570.
- Capital gains tax allowance £12,300.
- ISA allowance £20,000.
- Annual allowance for pensions £40,000.
- Lifetime allowance for pensions £1,073,100.
- These could all be extended beyond tax year 2025/26.
- Income taxes, all rates could easily be increased by 1%.
- Capital gains tax on shares and non-property related gains is currently 10% for basic rate taxpayers and 20% for higher rate taxpayers. For investment property gains, CGT is 18% for basic rate taxpayers and 28% for higher rate taxpayers. CGT used to be payable at normal income tax rates, so the precedent is already there. We expect some tax increases for buy to let and holiday let properties.
- Business Asset Disposal Relief (formerly Entrepreneurs’ relief) stands at 10% on a lifetime cap of £10m. This cap could easily be reduced to anything between £1m and £5m.
- Withdraw the £2,000 tax free dividend allowance.
- Increase dividend taxation by a further 1.25%. This would mean increases from 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers, and 39.35% for additional rate taxpayers to 10%, 35% and 40.6% respectively. Nice, round numbers for the first two tax rates.
National Insurance Contribution and/or the NHS and Social Care Levy
- The NHS and Social Care Levy has recently been withdrawn before it ever really got going. We disagree with the withdrawal as both the NHS and social care sector are in desperate need of additional funding. This could easily return.
State Pension Increases
- Triple lock may be withdrawn or amended. It is arguable that it is not reasonable to get a 10% pay rise this year and then when/if prices fall back due to the coming recession to keep that 10% pay rise. We have no problem with a 10% rise to help pensioners as the cost of living rises but equally, there should be a link that if we move into deflation i.e., negative inflation with prices falling, to take it back or forgo increases until the books balance.
Stop Moaning About Higher Taxation
Covid-19 debts amount to £500 billion plus a further £50bn for cost-of-living help and energy grants. Politicians use this as a weapon. Some journalists and many politicians never tell the public the truth. These debts must be paid for. Money does not ‘grow on trees’.
- Many businesses got £10,000 covid grants and then further grants if you had to close during subsequent lockdowns.
- Many hospitality businesses got £25,000 and further grants during subsequent lockdowns.
- Employees and employers got Furlough Pay help.
- Self employed got the Self-Employment Income Support Scheme (SEISS).
- Business recovery loans of up to £2m per business, underwritten by the government.
- Those on Universal Credit and Employment and Support Allowance (ESA) received additional uplifted weekly benefits.
- Cost of Living: If you receive, Universal Credit, income-based Jobseeker’s Allowance (JSA), income-related Employment and Support Allowance (ESA), Income Support, Pension Credit, Child Tax Credit and Working Tax Credit, you qualify for £650 grant payable via two instalments. In addition, £150 for Disability Cost of Living Payment.
- Energy Bills: £400 for every household in the UK, spread over 6 instalments between October 2022 and March 2023. In addition, if you are on benefits, you may receive an additional £150 on the Warm Home Discount scheme.
This must all be paid for. Opposition politicians and ill-informed journalists blame inflation, energy prices and higher taxation on the current government. Why do none of them tell the real truth to the people? It does not matter what colour or style of politics you have. Civil servants would have given similar advice to whoever was in power, and the fact that inflation is not just a UK problem. No one ever mentions the rest of the world has inflation problems and the rest of the world is also going to need to pay more in taxes for covid-19 debt. In fact, many EU countries pay much more in taxes than the UK does already.
As business owners that worked all through lockdown, with no furlough pay or grants paid to us or staff. We paid our staff in full all through lockdown as well as all VAT, corporation taxes and income taxes being paid in full. We are frankly quite tired of people complaining about benefits tightening or the state pension triple lock removal or higher corporate and individual taxes. We are all in this together and we must all pay for the help that was given to so many businesses and individuals during lockdown and still now for energy prices and cost of living. This can only be paid for by inflation devaluing government debt over the longer term, tax rises now and/or benefits being pegged back. We know this is a message that none of you want to hear but at least it is truth.
Some will argue that the rich should pay more. They already do. 10% of the population pays 90% of the taxes in the UK. Most of us do not pay for teh services and protection that we actually get and whilst we accept there can be huge wealth divides, there are equally some that have worked extremely hard for their wealth and some that do nothing at all to contribute to society and are simply given 'free money'. We all need to pull together and stop politicians dividing us for their own gain.