Speculation over chancellor Rishi Sunak’s budget has been rife with rumours of changes to inheritance tax, capital gains tax and pensions triple-lock
The coronavirus spending by the UK government has forced Sunak to make some big decisions.
Neil Jones, tax and wealth specialist at Canada Life, believes that the chancellor’s reported plans may be problematic for some Brits.
“Some people think we’re in for a few tax changes and tax rises because, in theory, we have to pay for the extra spending that covid has caused,” Jones told International Adviser. “The tax changes are going to be quite an upheaval for some people, especially if they start changing the basic structure of tax.
“People have talked about inheritance tax, and that is already 40%. The nil rate band hasn’t changed for many years, it’s been frozen for quite a number of years.
“So effectively, it’s already gone up in those times because more people are paying it. I don’t know how much more they can squeeze out of inheritance tax.”
Aside from IHT, capital gains tax has been rumoured to be part Sunak’s plans.
In July, the chancellor of the exchequer asked the UK’s Office for Tax Simplification (OTS) to undertake a review of the country’s CGT rules.
Jones added: “I think there will be some changes. It depends on when the budget is because the Tories have promised not to increase income tax, VAT and National Insurance in their election manifesto.
“So that leaves things like capital gains tax, which is seen as quite a prime target for any changes. We usually get a 10 week notice for budget; the rumour is that it might be somewhere around about the middle of November.
“But that is effectively less than 10 weeks. So, we’re going to have a slightly shorter notice period unless it goes into December.
“It’s going to be debatable whether they’re going to get the responses from the OTS and from the consultations, in order to decide what to do about CGT unless they’ve already decided.”
“In my eyes, there’s a good chance that you could see the rates of capital gains tax equalised with income tax, whether that happens in the next budget or next year is another matter.”
The topic of estate planning has become part of many conversations over the last few weeks due to the rumoured tax changes.
This may prompt people to look at their plans more.
“During the early parts of covid, there was a lot of people sort of thinking I need to make Wills, I need to do some planning,” Jones added. “It just hammered home the point that people need to do things sooner rather than later.
“Estate planning has always been one of those things that people go, I’ll do that in the future.
“And some people don’t get round to it, so it is important they have the correct plans in place for the people who are going to inherit their money.”