Are you braced for the impact of tax rises?
As concerns grow about imminent tax rises, Murray Patt of Hale-based accountants Alexander Knight & Co, takes a look at possible areas that could be targeted by Rachel Reeves (the Chancellor) and the ‘new’ Government.
As children return to school for the new term there are plenty of parents worried about the impact of VAT on future school fees. Recently the Chancellor confirmed that this 20% levy will be introduced, together with legislation to prevent those looking to pay early and avoid the levy, as the Government seeks to implement a key manifesto pledge.
Even those not affected by VAT on private school fees are anxious about the prospect of handing more money over to the taxman from elsewhere.
It’s no secret that changes have been promised and are actively being planned but the key question is exactly where will they seek to raise revenue? Here are some possible areas:
- Removal of tax breaks
The removal of certain tax breaks looks increasingly likely. Politically, it is a safer move than simply hiking up existing taxes. We are keeping a close eye on what is commonly referred to as ‘business asset disposal relief’ (formerly known as ‘entrepreneurs’ relief’) which reduces the rate of capital gains tax on disposals of businesses or business assets from 20% to 10%. Another area under threat could be Research and Development (R&D) tax credits which have been helpful for innovative companies over the past few years.
- Freezing of thresholds
The freezing of tax thresholds means that people will pay more tax.
Simply put, earning more money tips you into a higher tax band and a higher income means a higher proportion that can be taxed.
- Introduction of additional income tax thresholds
The Government may consider introducing an additional rate of income tax, perhaps on earnings over £250,000. Currently this is taxed at 45%.
- More tax for landlords?
The sale of property by landlords could possibly be targeted as a revenue stream. Landlords with buy-to-let portfolios are already offloading stock at record levels as they seek to minimise the risk to their investments.
- Inheritance Tax
This hugely unpopular tax for swathes of the population doesn’t look like disappearing. In fact, there is likely to be significant reform in this area which will presumably be aimed at raising tax revenues not reducing them.
- Firmer enforcement
Labour has already pledged to provide HMRC with 5,000 more staff to help reduce what it calls the ‘tax gap’. We already expect to see compliance enforcement activity increased over the next five years with SME’s targeted first, much to the frustration of business owners.
As the rumour mill continues to swirl, we are ruling out nothing. We will support our clients to limit the amount of tax they pay whilst being compliant with ever changing legislation in every way we can.
If you run a business and want to make sure you are optimising all the available tax reliefs and need support navigating future tax rises contact Murray Patt on (0161) 980 8788 or email murray@alexanderknightacccountants.co.uk
