In February this year I broke with my convention and predicted what the Chancellor would announce in his Spring Budget.
I reckoned that allowances would be frozen and this proved to be precisely what the Chancellor announced, indeed freezing many allowances until 2025.
I did not think that the Chancellor would disturb CGT rates, although many commentators were anticipating such a move. My reasoning was that CGT , more than any other tax, is discretionary. If the tax payer has a choice and he considers that the tax take is too much, he will refrain from disposing of the asset until a later time when the tax rate may be propitious. The maximum rate of CGT is 28% in respect of residential property and I would say that this is generally the maximum that people will stomach. Above that, they are less prepared to acquiesce.
In the article I also referred to inflation helping to increase the tax take. I fear that this is now back with us for some time to come.
This time round I think the Chancellor will restate these strictures. He will no doubt make a very skilful presentation, making a virtue out of necessity. I am sure he will avoid saying “We are all in it together”, given that he and his wife are multi-millionaires.
We know that we have this additional levy of 1.25% on wages and dividends, to help with the social care problem, due to come into play in 2022.
Fairness might suggest that this levy should be extended to rental income and bank/building society interest. Given that landlords have been hammered through the restriction of mortgage interest relief and extra environmental regulations, the Chancellor may pass over the rentier. He may also be reluctant to further discourage investors in a climate of such low interest rates.
Mr Sunak might possibly have another pop at pension funds and reduce top rate relief, maybe with a restriction to a basic rate or a blended rate. I think he will stay his hand here as well. He has still not really fixed the problem with pension fund overfunding and the exodus of high level employees out of the National Health Service because of the punitive penalties for overfunding their pots, which they can do very little about.
Whatever the outcome, we’ll be covering the announcements on our website and socials. If there are any issues which require immediate assistance, do speak to your usual Lambert Chapman contact.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.