Published

The government had clearly been lowering expectations around ‘Tax Day’.

Now we know why.

Those eagerly awaiting an announcement of a full review of Capital Gains Tax and Inheritance Tax will have to continue waiting.

There was no mention of a reform of Capital Gains Tax. This is despite an Office of Tax Simplification (OTS) review suggesting significant changes, including the possible alignment of income and capital gains tax rates.

On Inheritance Tax, HM Treasury has finally recognised that the system is too administratively complex. The intention is to take 90% of non-taxpaying estates out of the reporting system. Any radical proposals for reforming Inheritance Tax, as also suggested by the OTS, are clearly for another time, although there are hints that HM Treasury minds are focused on bigger fish in the tax-raising pool.

There were no notable changes to the pension tax relief regime. This remains generous for many pension scheme members and therefore costly to public finances. We are pleased that there continues to be an incentive to save for a secure retirement.

Taxation of trusts has again been put under the spotlight and, despite the evident complexity, no changes are being proposed – another missed opportunity.

Key Consultations

  • A big focus on improving HMRC’s sometimes creaking IT systems, enabling more progress towards a ‘one stop’ digital system. Assuming digital exclusion is addressed effectively, this is likely to be widely welcomed. It could make life easier for us all and the tax system more efficient.
  • Further proposals to prevent abuse of the tax system.
  • A proposal to make Professional Indemnity insurance compulsory to provide more protection for clients. The tax advice area is clearly not universally respected by the HM Treasury; this is one of the ways in which they are looking to enhance standards.
  • A long-overdue review of the Business Rates system, now even more controversial than prior to the pandemic.
  • Proposals for a tax on large property developers to help fund the removal of cladding on some flats.
  • A call for feedback on a proposed Carbon Emissions Tax, as part of our ‘carbon neutral’ commitment, and to increase the cost of long-haul flights. Although overall, and perhaps surprisingly, the eco agenda seems rather light.
  • Proposals to make it more difficult for owners of second home properties to avoid council tax, by declaring the property to be a holiday let business, while having no serious intention of letting the property.

Final Thoughts

Whilst there is a fair amount of consultation, none of this suggests radical policy thinking – which, in financial planning terms, is arguably welcome in the current environment. Further details are expected in the autumn.

Taking advantage of current opportunities while anticipating future changes lies at the heart of all we do on behalf of our clients. Initiatives such as ‘Tax Day’ serve to reinforce the value of this approach, underpinned by our in-depth expertise and experience, over many cycles of change and stability.

If you would like to discuss any aspect of this bulletin, please get in touch.

 

Disclaimer
This communication is prepared for general circulation and is intended to provide information only. It is not intended to be construed as a solicitation for the sale of any particular investment or as investment advice and does not have regard to the specific investment objectives, financial situation, and particular needs of any person to whom it is presented. Tax treatment will depend upon individual circumstances and may be subject to change in the future.

Please also note that the value of investments, and / or the income from them, can fall as well as rise so you could get back less than you invested. The past performance of an investment should not be relied upon as a guide to its future performance. Unless indicated otherwise, comment and opinion in this publication is based on HMRC’s tax regulations for 2020/21 tax year and future proposals.

This communication has been approved and issued by Punter Southall Wealth.

 

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