Today has been named Tax Day and, at around 13.00, there will be a string of tax related announcements.
HM Treasury will unveil a number of documents and consultations on
future tax policies on March 23, which has been dubbed “tax day”.
The Government has said the announcements, typically made at the
Budget, will come later than usual this year to allow for greater
scrutiny alongside the vast number of changes and support measures
already announced.
Much of this is expected to be about technical administration of the
tax system, such as the move to online. But commentators are also
bracing for Rishi Sunak to lay the groundwork for a string of possible
tax changes.
One move likely to be unveiled by the Treasury is a plan to reduce the amount of paperwork many grieving families are required to fill out for inheritance tax purposes.
More
than 200,000 estates will no longer need to complete certain
inheritance tax forms under the latest changes. Currently estates that
do not need to pay inheritance tax are still required to fill in HMRC
pre-probate forms.
Nimesh Shah of accountants Blick Rothernberg said he was preparing
for “significant” announcements that were delayed because of the January
lockdown.
The Chancellor has already announced a £20bn “stealth tax” freeze on
protections against income, capital gains and inheritance duties to
“support the public finances” as the below graphics shows, as well as an
increase to the rate of corporation tax to 25pc from 19pc by 2023.
But the Chancellor will have to raise billions more to plug the £400bn deficit. So what else could “tax day” bring?
Changes to inheritance tax
Changes to the death tax regime expected to be announced on Tuesday
will save hundreds of thousands of bereaved families needlessly filling
out tax forms every year.
Jesse Norman, the Financial Secretary to the Treasury has said: "We
want to cut red tape and make the tax system as simple as possible for
people to use, especially during difficult times. The change is part of
our wider drive to remove unnecessary paperwork and obstacles so that
taxpayers can manage their affairs with less effort."
It was a idea suggested by the Government's tax adviser the Office of
Tax Simplification, alongside a number of other policy ideas, in a
series of reports on simplifying the divisive 40pc duty.
Online sales tax
The Government is expected to give its thoughts on a number of policy
proposals for reforming and even replacing business rates, including a
new 2pc online sales tax to raise £1.5bn a year.
The idea, put forward by the Treasury Select Committee, an
influential group of MPs, would be to ease the pressure on high-street
businesses while forcing online giants to pay more.
It would help cover some of the £10bn cost of the pandemic business
rate holiday. Other proposals included an overhaul of the current system
to tax landowners instead of shopkeepers.
Freelancer taxes
Reports in The Times have suggested the Government is planning to
announce a new "pay-as-you-go" digital tax system, although the Treasury
has played down the claim saying it "did not recognise the story".
The system would reportedly see every taxpayer allocated a single
digital tax account, which banks, workplaces and pension providers would
automatically update.
Freelancers, investors and landlords would pay throughout the year rather than on set deadlines.
Other measures could include the self-employed eventually being forced to pay more tax, if Mr Sunak decided to review the lower rates of National Insurance they pay, compared with that of employees.
The Chancellor heavily hinted he wanted everyone to pay into the
system equally, when he announced income support for the self-employed
back Spring 2020.
Paul Falvey of tax firm BDO said it was likely the Government would
look to more closely align the tax treatment of the self-employed and
employees in the coming years.
Bigger taxes on investment profits
None of the announcements will require legislation in this year’s
Finance Bill and will not have an immediate impact on public finances,
but the Chancellor could signal future changes to come in after April
2022.
One of these could be a reform of the capital gains tax system,
according to experts. They expect a response to a review into the levy
carried out by the Government’s own tax adviser, the Office of Tax
Simplification, and commissioned by the Chancellor himself in the middle
of the pandemic.
It proposed a raft of changes to the current regime, but its most eye
catching recommendations included upping the historically low main
rates – 20pc, or 28pc for residential property – and slashing the
£12,300 personal allowance, which could raise £14bn a year.
Richard Wild of the trade body the Chartered Institute of Taxation
said he expected to see changes to Business Assets Disposal Relief,
previously called Entrepreneurs’ Relief. This discounts CGT for people
selling shares in their own firms. Some have called for its abolition.
Pensions tax relief faces cut
Fears of a bombshell tax raid on pensions are spreading in the City
with the Treasury understood to be considering radical cuts to tax
relief.
Officials have signalled they are debating whether to slash
higher-rate tax relief on pensions contributions in private meetings
with industry, The Telegraph can reveal.
Whitehall sources have ruled out proposals for a pensions tax hike on
March 23. However, it is thought reforms are being seriously
considered that would be highly damaging to the finances of Middle
England.
Read more: Pensions tax relief raid: how much it could co
Tax does have to be taxing.
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