The government has already ruled out increases in VAT, income tax, and National Insurance. However, following recent hints of “difficult decisions,” there is growing speculation that other tax changes could be introduced. Here’s a look at some areas that may be affected:
Capital Gains Tax (CGT)
Capital Gains Tax is charged on the profit made from selling assets that have appreciated, such as second homes or investments. It applies to individuals and some business owners, with the rate depending on the taxpayer’s income tax band. The Budget could see changes to CGT rates or thresholds, which would affect those selling high-value assets.
Inheritance Tax (IHT)
Inheritance Tax is currently set at 40% and applies to estates valued above £325,000. There has been speculation that this threshold could be adjusted or that rates might increase. Any changes could have a significant impact on estate planning for families.
Fuel Duty
Fuel duty has been frozen since 2012 and was temporarily cut by 5p in 2022 to offset rising fuel prices. However, there’s talk that this cut could be reversed, raising the cost at the pump for motorists. Some industry experts argue that the initial cut was not fully passed on to drivers, making this a contentious issue.
Pension Tax Relief
At present, pension contributions receive tax relief at the contributor’s income tax rate. This means basic-rate taxpayers get 20% relief, while higher-rate taxpayers get 40% or 45%. There have been discussions about introducing a flat rate of tax relief, which could reduce the benefits for higher earners. While this specific change seems unlikely, other aspects of pension tax relief might be modified.
Non-Domicile Tax Status (“Non-Dom”)
Non-dom tax status allows UK residents whose permanent home is abroad to avoid paying UK tax on income earned outside the country. Labour has been pushing for stricter rules or even the abolition of non-dom status, although concerns have been raised that such changes might not generate the expected revenue.
As we await the Budget announcement, these potential changes could have a wide-ranging impact on taxpayers, investors, and pension savers alike. Keep an eye on these developments to understand how they may affect your financial planning.
If you need advice on how these changes could impact your financial situation, please don’t hesitate to contact us for a personalised review.
Source: BBC News