The October Budget – possibilities and predictions
The autumn Budget will take place on 27 October 2021. Current rumours circulating are that the Chancellor will announce a ‘technical’ budget where the devil is in the detail. The country is facing a difficult economic time and there are many questions to face up to. After the Social Care levy was announced in September what might be on the cards this month?
Can the government keep running a deficit?
The Chancellor has stated that government finances have to return to balance at some point and the deficit be reduced. After the announcement of the corporation tax and NIC increases there are hints that there won’t be more tax rises in the budget.
Commentators are predicting changes to Inheritance Tax (IHT) and Capital Gains Tax (CGT) following recent ‘simplification’ reviews by the Office of Tax Simplification. IHT is increasingly bringing in more tax for the Treasury and it would be plausible for the Chancellor t simplify many IHT rules that result in increasing future revenues without directly changing headline tax rates with the vast majority of taxpayers unaffected.
Other stealthy tax rises have already been announced, for example, freezing personal tax allowances from April 2022 will raise considerable revenue. Freezing other allowances and thresholds at a time of rising inflation could be financially beneficial for the Chancellor over the next few years.
Increasing capital gains tax, possibly by aligning it with income tax rates would be a visible tax rise but may not collect a great deal relative to the total tax take. Announcing a tax rise for April 2023, could incentivise asset owners to sell up in 2022/23 and bring a cash boost for the Treasury in the short term. However, in the light of the NIC increase, perhaps making technical changes that cut back CGT reliefs is a more likely option.
More business taxes?
Corporation tax is already set to rise in 2023 and various forms of pandemic support (from furlough to business rates relief) are being phased out this autumn, so it doesn’t seem likely that the Chancellor would risk many more business tax increases. But that doesn’t mean that the government can’t increase its tax take from businesses in other ways. HMRC is already highly focused on tax errors and avoidance related to pandemic support and the government might offer a ‘disclosure facility’ to all those coming forward to correct mistakes in the short term.
The government has already announced that it will temporarily set aside the triple lock for the state pension because the current high rates of wages growth would push up pensions faster than general inflation.
Therefore, although it is a recurring prediction that the Chancellor will look at tax relief for private pensions again, the current political climate will probably make that a difficult proposition.
The Chancellor promised to publish the final findings of the government’s business rates Review this autumn, having delayed the final report due to the ongoing pandemic. It is probably rather hopeful to assume that radical reforms will be announced in the Budget and business rates look set to stay for now.
We will be sending out a budget review summary and package for you to download the day after the budget so that you can understand what the announcements will mean for you.
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