The run-up to a Budget is always an exciting time at Sagars – there’s speculation around what might happen, eager scouring of the press to pick up any leaks ahead of the day, planning ahead for our budget event, and hoping there will be interesting and helpful new measures to discuss with our clients.

It’s perhaps understandable that the pandemic has managed to overshadow Brexit and remain the main topic of discussion over the last 18 months. But, given that we are now 19 months on since lockdown 1, might the Chancellor use his Budget speech next Wednesday 27th October to announce some more significant tax measures?

Only time will tell, and we will be aiming to get our Budget analysis published on Thursday 28th. Our virtual budget event is the following week on Wednesday 3rd November at 10am and you are very welcome to join us – just sign up here.

Speculation

In the meantime, you might be interested in the thoughts and ideas that our team have shared below. Sadly, we don’t have any ‘insider information’, so this is merely a summary of our collective speculation:

Capital Gains Tax (CGT)

It wouldn’t be the run-up to the Budget if we didn’t have some speculation that CGT rates could increase. At the moment, if you qualify for Business Asset Disposal Relief, your CGT bill could be only 10% on the first £1m of gains, 20% otherwise. It’s 28% if your gain relates to residential property, and this now applies to non-UK residents’ tax too. It’s often speculated that an increase in CGT is a relatively easy way for a Chancellor to increase the tax take without alienating too many of the voting population, as many people don’t fall into CGT.

Pension tax relief

Another recurring pre-Budget speculation topic is that higher rate tax relief on pension contributions could be removed, or that the limits for making pension contributions could be reduced. They are substantially lower than they were a few years back, so whether the view is that pensions have already been targeted enough remains to be seen. If you were thinking of making a one-off pension contribution, it’s wise to try to do it ahead of any Budget announcement, just to be safe.

Dividend tax and National Insurance Contributions (NIC)

With the recent announcement introducing the 1.25% health and social care levy with effect from 6 April 22, as well as an increase of 1.25% to dividend taxation, it’s thought to be unlikely that we will see any further changes to income tax and NIC.

Corporation tax

Again, we are already aware that corporation tax will increase from 19% to 25% in April 2023, so it seems unlikely that any additional changes will be announced.

Inheritance tax (IHT)

Pre-pandemic there was the suggestion of a major overhaul of the IHT rules – could that happen now? It wasn’t necessarily a means of generating extra revenue and arguably this isn’t the right time to implement huge changes that will be complex to incorporate into the current regime. However, if IHT changes were to be implemented, this would require significant planning, so it’s an area that we are keeping a very close eye on.

Green taxes

There is quite a bit of speculation around the potential introduction of new environmental incentives – ranging from tax incentives to encourage environmentally-friendly investments, to reduced VAT on ‘green’ energy sources. Again, something to keep an eye out for.

We will be in touch next week

We don’t know what the Chancellor will focus on next week, but we will certainly be paying close attention to the announcements. As ever, we will put our effort into explaining both the headline measures and, more importantly, their likely impact on you – whether that’s for better or for worse.

Kate Naylor
Kate Naylor
Tax Partner

Kate works with businesses and their owners on tax strategies and mitigation, looking at business and personal tax structures to achieve long term goals.

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