It’s that time of year again. The Budget Speech is scheduled for 27 October, and with the country and Government trying to return to some sort of normality as the pandemic continues, and the deficit and National Debt seemingly out of control, this is set to be a very interesting Budget. Tax rises, it seems, are inevitable.

Health & Social Care Levy

This has already been announced and we can perhaps expect some more detail in the Budget. So far, we know that there will be a 1.25% increase in Class 1 employees and employers National Insurance rates, Class 1A and Class 1B rates on benefits in kind, Class 4 rates on self-employed profits, and income tax on dividend income.

The increase does not apply to interest, property income, chargeable event gains or other sources of income. For the moment. It seems difficult to believe that after sustained attacks on the residential property market that landlords will be left alone for long.

Capital gains tax

It seems that gains have always been taxed at lower rate income, but this is not the case. Up until 2007/08 gains were taxed at the rates of income tax. We then had an 18% rate and tinkering with 10%/20% rates, with 18%/28% rates for residential property. It was thought that capital gains tax would be increased at the last Budget, so it would not be surprising if we saw capital gains tax rates increase, perhaps with a penal rate for residential properties.

Inheritance tax

The amount of inheritance tax raised has increased from about £2.3bn in 2009/10 to about £5.3bn in 2020/21. That said, in the last 4 or 5 years, statistics show that the amount of tax raised plateaued and the percentage of estates paying inheritance tax is falling. A rise in the main rate of inheritance tax or a reduction in the nil rate band seems inconceivable, but will there be changes elsewhere? Perhaps a tax on gifts, like many other countries around the world. Or a wealth tax, again, taking the lead from other jurisdictions.

Stamp Duty Land Tax

SDLT receipts increased from £4.8bn in 2008/09 to £15.2bn in 2019/20. Owing to COVID this dropped off a bit in 2020/21, but with the housing marketing back to strength and house prices rising, it is likely that SDLT collection will bounce back and will continue to be an important source of revenue. Will we see even higher rates of SDLT? Will we see landlords penalised further?

Other tax raising measures

It seems that taxes need to be raised, but any rise is painful. Income tax, capital gains tax, inheritance tax and stamp duty rise will all affect people’s plans, lifestyles and opportunities. We already have a National Insurance rise in the form or the levy, and a corporation tax rise on the horizon.

Rather than actual tax rises, the acceleration of taxes could also be considered. Making Tax Digital is now pegged to be introduced from April 2024. While still some way off, this paves the way for tax being paid quarterly as profits arise – like a PAYE system but for property income and self-employed profits. We could also see the expansion of the 30-day deadline for filing capital gains tax returns, perhaps with quarterly reporting for all gains. And maybe, even, and increase in the rate of VAT.

We could also see tax rises in the form of restricted reliefs. Pensions are often a favourite, we could see further restrictions on the use of losses, or maybe a clawback of Child Benefit from more families. If you want to discuss the Budget and your tax position, either before or after, please get in touch with your usual contact or me.