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What changes we might expect to see announced in the Chancellor's Budget this week - Mark Evans, Operations Director & Independent Financial Adviser
The Chancellor has provided unprecedented support during the past 12 months and I expect this theme to continue. Any swift attempts to increase tax revenues could potentially hamper the economic recovery that we all hope and expect to happen once restrictions are lifted and life returns to something approaching “normal”.
Those industries that require the most support will surely be the priority for the Chancellor, with a bumper aid package for the arts already inevitable. The VAT cut for tourism and hospitality will likely be extended. Despite the negative response that the last “eat out to help out” scheme received when restrictions were brought in during the winter, I expect there to be a second version of this to be announced at some stage.
Specifically, will there be any changes to Inheritance Tax? How should people prepare?
The idea of a ‘one-off’ wealth tax has reportedly been ruled out by the Chancellor, but changes to our existing wealth taxes including capital gains tax (CGT) and inheritance tax (IHT) seem more likely.
While there may be changes coming, I would never advise people to make decisions based on guesswork.
I would suggest people continue to do the sensible things that you would normally be doing. Making any rushed decisions based on guessing what may or may not be announced in the budget may leave you regretting your decisions.
I would always suggest that people use the allowances that are available to them, such as:
- Gifting out of normal income.
- Giving away £3,000 per tax year.
- Gifts to Charities.
- Payments to help with another person’s living costs, such as an elderly relative or child under 18.
There are many ways that you can plan to mitigate IHT and I imagine there will continue to be options to do this going forwards. Whilst this is also a reason that IHT is likely to be an area that is amended ongoing, I’m not sure that it’s going to happen now. I’m sure the Chancellor has been extremely busy during the pandemic, I’m not sure he’ll have had the resource to amend such a complex and emotive area.
Is the Chancellor likely to raise any taxes in your opinion? Why?
Strong rumours have been circulating regarding a rise in corporation tax rates, with a gradual rise expected between this year and 2024. While this may not seem like a particularly supportive move from the Treasury, there have been many larger companies who have performed well during the pandemic and an increase here is possible.
The two areas that I expect to be targeted by the Chancellor are environmentally damaging industries and digital businesses. Public opinion on the impact we are having on the environment seems to have shifted hugely during the time we’ve spent at home and I expect the Chancellor to raise taxes on environmentally damaging goods and services. Digital business have seemingly been able to avoid the normal taxes that the more historic company structure would be paying. Previous Chancellors have made changes to deal with this but I expect Rishi Sunak to continue this. Many digital businesses have continued to thrive during the pandemic and so any attempts to increase the tax take here would perhaps be understandable.
Mark provided this comment after being asked by the Daily Express for his opinion on tomorrow's announcement.