Autumn Statement Looms: Taxation Takes Centre Stage in Election Season.
As we welcome the arrival of autumn, it's a reminder that the Autumn Statement is just around the corner, scheduled for delivery by the Chancellor on 22nd November. While we anticipate this statement, it's evident to many that we've entered the election campaign season, with tax emerging as a key component of the election agenda.
According to a recent Institute for Fiscal Studies (IFS) report, the UK government is poised to collect an additional £3,500 per household by the time of the next election, compared to the 2019 election, marking the largest tax-raising period in parliamentary history with a 4.2% increase. The report attributes this growth to factors like stealth taxes (where tax thresholds don't keep pace with inflation) and the corporation tax hike, which now stands at 25% for most businesses. The report also predicts that the tax burden will climb from 33% of GDP in 2019 to around 37%, marking the most significant increase since the 1950s, when records began. The government's current focus is on reducing inflation, while the Labour Party, as revealed in Shadow Chancellor Rachel Reeves' recent speech at their conference, may take a different approach:
- The additional stamp duty land tax for overseas purchasers of residential properties from the current premium of 2% above the standard rates;
- Windfall tax for energy companies;
- Abolish non-UK domicile tax status, that provides those who qualify with tax advantages. (HMRC recent data shows that the number of new non UK domiciles has fallen by 40% in the past year);
- Abolishing the VAT exemption for private schools;
- Covid corruption commissioner supported by a team of investigators to recover Government funding from those who obtained Government support or won contracts by way of fraud;
- Not a tax measure, but an employment law measure, with the announcement that zero-hour contracts will be banned, and new laws on fire and hire will be repealed while sick pay will be strengthened, and employees will be given ‘basic rights from day one’ regarding any new employment. The national minimum wage will also be increased to ‘a genuine living wage’ reflecting real living costs;
- Although not part of the speech, it was reported in advance of the conference, that Labour is exploring closing tax reliefs generating funds to meet spending commitments. The review of the tax system has identified at least £4 billion that could be raised by abolishing reliefs, that only a small percentage of the population benefit from.
Reliefs being considered:
- Reform of inheritance tax by abolishing agricultural property relief, or restricting its use, as well as business property relief which currently exempts shares in an unlisted company or a significant interest in a business, being subject to inheritance tax.
- Abolishing or reducing business asset disposal relief, which enable individuals who own qualifying business assets, including qualifying shares, paying a 10% tax rate on a capital disposal where a chargeable gain arises.
It is understood that the Labour party are driven by not allowing the Conservatives to fight the election on tax, having confirmed that it would not bring in a mansion tax on expensive properties, increase capital gains tax or raise the top rate of income tax.
Overturning the pension announcements in the March Budget earlier this year has not been mentioned recently, but Labour did make an announcement post the Budget, that they would reverse the changes.
Time will tell and we are probably at least 12 months from a general election, but the parties are starting their campaigns, and tax is likely to feature on all party’s agenda.
LASTING POWER OF ATTORNEY.
Beyond the potential tax implications, another crucial aspect of business and personal protection we frequently discuss with our clients is the importance of having an updated Will and a Power of Attorney in place. A Power of Attorney grants an individual the ability to designate one or more trusted individuals to make specific decisions on their behalf when they are unable to do so themselves. It's not only a good practice for personal assets but also highly advisable for business owners to safeguard both themselves and their businesses. For more information, please refer to the main article below. To establish a Power of Attorney, it's necessary to consult a solicitor, and this is also an opportune time to consider drafting or reviewing your Will.