Chancellor lines up Covid-19 tax grab for autumn
BRITONS are being warned to brace themselves for an autumn tax shock, as Chancellor Rishi Sunak desperately searches for ways to raise money to fund his Covid-19 bailout.
Capital gains tax (CGT), inheritance tax and council tax could all rise, while pensions tax relief could be cut, and the state pension triple lock trimmed back. A new wealth tax is an option.
Yesterday, the Chancellor wrote to the Office for Tax Simplification requesting a review of CGT rules and AJ Bell senior analyst Tom Selby said: “This feels like the starting pistol for a tax grab ahead of the autumn budget.”
Those who expect to make large capital gains might consider taking them before any potential tax hikes, and families might also consider taking advice to reduce inheritance tax exposure.
Hargreaves Lansdown senior analyst Nathan Long said that saving jobs is a priority today: “The question remains, how on earth will all this be paid for and when will we get the bill?”
Long said Sunak may target higher rate tax relief on company and personal pensions contributions: “Anyone paying tax at 40 or 45 per cent should consider paying more into their pension to claim this relief while they can.”
Long warned that a tax grab could backfire: “A knee-jerk raid on wealth would be hugely damaging to the fragile confidence of savers and investors.”
Jon Greer, head of retirement policy at wealth manager Quilter, said the state pension triple lock, which pledges to increase state pensions by either earnings, inflation or 2.5 per cent, will come under renewed pressure.
The mechanism is likely to give pensioners a huge pay rise next year, at a time when millions are struggling. “Maintaining the triple lock in its current form is simply not an option,” Greer said.
A recent YouGov poll found that more than six out of 10 Britons supported a wealth tax on assets worth above £750,000, excluding pensions and the value of their main home.
Leon Fernando Del Canto, barrister at Del Canto Chambers, said the UK is likely to follow Belgium, Italy, Netherlands, Norway, Spain, France and Switzerland by introducing a wealth tax.
Del Canto said this can be useful in times of crisis but will not raise enough revenue on its own: “It accounts for just 0.5 per cent of tax revenues in France rising to 3.7 per cent in Switzerland.”
Fidelity International investment director Tom Stevenson agreed that wealth distribution taxes could figure highly in future: “Those that are most likely to pick up the tab should plan ahead of this autumn’s budget.”
Stevenson said that if tax rises and spending cuts cannot balance the books, then the Government may stoke inflation in a bid to erode the value of the nation’s debt pile.
He called this “the greatest stealth tax of them all and added: “We have forgotten what spiralling prices are like, but we may well find out sooner rather than later.”