What the budget means for your taxes
- Credit: PA
Danny Clifford, a personal tax and trust partner at Ensors, explains what the Budget will mean for your tax bill.
For months now those of us working in the tax profession, the professional press and indeed the clients themselves have been speculating as to what major changes the chancellor might make to the personal tax regime.
There is always such speculation of course – the availability of higher rate tax relief on pension contributions is an annual staple for consideration. But this year the speculation went into overdrive.
Several official reports on reforming inheritance tax, one on capital gains tax, a massive fiscal deficit to deal with – surely something major was going to happen.
Would he increase income tax? VAT? National insurance?
The last Conservative manifesto had pledged no increases in those areas. In normal times it would be almost impossible to row back on that. But we are a very long way from ‘normal times’.
A wealth tax maybe? An increase in the rate of capital gains tax? Restricting inheritance tax reliefs for business or agricultural property?
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None of the above as it turned out.
For those for whom some or all of the above were significant concerns, a freezing of personal tax allowances and bands will have been viewed as the least of all possible evils.
Without seeking to minimise the significant implications for households of freezing tax allowances and bands through to 2026, that is still quite some way short of the ‘tax armageddon’ anticipated by some.
So, can we all relax?
That depends upon the degree of success of the measures announced by the chancellor to fill the hole in the public finances – and the race against time to do that before interest rates move against us and increase the cost of carrying that record deficit.
By way of example, my view is that the whole system of inheritance tax and its interaction with capital gains tax will be reconsidered in the short to medium term.
Whenever something like this is done there are winners and losers.
If the chancellor’s Budget measures are not dealing with the deficit then any changes following such a review are likely to produce more losers than winners.
If, however, the economy is well under way to recovery such a restructuring may be more neutral in overall tax terms.
For now, rather than increase personal taxes the chancellor is to tax businesses more and is looking for the UK economy to “grow itself better” by creating an environment for investment.
The future of personal taxes will, I feel, be decided by the success or otherwise of measures such as Freeports.
Over to you Felixstowe and Harwich!