5 tax rises that could pay for Coronavirus
Which could these be?
Uncertainties caused by Coronavirus mean tax rises seem beyond doubt. The question isn’t if, but more likely when, and which taxes could these be?
Of all the uncertainties caused by the Coronavirus global pandemic, tax rises seem to be beyond doubt. The question isn’t if, but more likely when, and which taxes could these be?
Anthony Ward, Head of our Wealth Planning team, considers which taxes could increase.
1. Income Tax
Ranging from 20% to 45% for top earners the Tories' 2019 manifesto pledged not to raise Income Tax however the Treasury have said it will be very challenging to maintain these rates now so much has been spent on COVID-19.
A penny extra of Income Tax on each pound earned could reportedly raise £5bn a year.
2. National Insurance
This seems likely to rise as it has already been hinted at by Chancellor Rishi Sunak1.
The target for any change could be the self-employed. In March the Chancellor said, "I must be honest and point out... it is now much harder to justify the inconsistent contributions between people of different employment statuses. If we all want to benefit equally from state support, we must all pay in equally in future."
3. Capital Gains Tax
This does not raise as much funding as income tax however the current rates of 10% for basic rate tax payers and 20% for higher rate tax payers (18% and 28% respectively for residential property and carried interest) is widely seen as being low so it is not unreasonable to expect a hike in the rate or a fundamental overhaul.
For smaller investments most investors are taken care of by using ISAs or the £2,000 dividend allowance however those with larger portfolios could see tax hikes. Entrepreneurs withdrawing dividends rather than salary from a limited company could very well see changes too.
5. Wealth tax
Finally, calls for a wealth tax to be introduced have resurfaced. This has significant implications for the forthcoming debate on who, if anyone, should pay for the coronavirus crisis. Should the Government introduce a tax on the wealthy it would have the potential to generate billions in tax revenue.
Support is available
Our Wealth Planners can’t give personal tax advice but can help you plan for the future in conjunction with independent tax advice that you might take and thus potentially reduce the impact tax rises could have on your personal and financial goals.
Whether you have taken independent tax advice in the past or you are doing so for the first time, our Wealth Planners are available to help you understand your options.
Contact your Wealth Manager if you would like to arrange a meeting with a Wealth Planner to discuss your options.
We’re not providing you with financial, legal or tax advice, so nothing contained in this article should be construed as constituting legal, financial or tax advice. Tax rules and legislation can change and the benefits and drawbacks of a particular tax treatment will vary with individual circumstances. We recommend that you take professional advice where required. You have sole responsibility for the management of your tax, financial and legal affairs, including making any applicable filings and payments, and complying with any applicable laws and regulations.
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