Duncan & Toplis Autumn budget predictions

‘Stealth’ tax changes

Rather than introducing new tax or major reforms to raise money, it’s likely that the chancellor will instead ‘simplify’ existing taxes, making small tweaks and changes which happen to also raise government revenue.

These ‘stealth’ tax changes may go unnoticed or overlooked on the day but they have important implications for those affected.

After many years of speculation, this may mean changes to inheritance tax (IHT) or capital gains tax (CGT) following reviews by the Office of Tax Simplification. It’s already been announced that basic periods for sole traders and partnerships are set to be reformed from April 2024, meaning that business profits will be calculated for the tax year rather than another accounting year, but there may be more similar ‘simplifications’ to come.

IHT is often viewed as a maze of complex rules, exemptions and reliefs and this could be simplified to increase the amount of money the tax generates without raising the overall tax rate. This could be popular politically because, contrary to popular belief, it is only paid on estates worth more than £325,000, and up to £1,000,000 for couples with a family home to pass on. This means most people are exempt, although more wealthy families may not be so impressed, as well as the traditional conservative voters of ‘middle England’.

For CGT, one of the Office of Tax Simplification (OTS) recommendations was for the government to raise the rate to 20% for basic rate taxpayers and increase the rate for high rate taxpayers to 40%, bringing it into line with income tax. In the March Budget, the government froze the threshold at which you start paying CGT at £12,575 until 2026 but there may be further changes to come.

Employment support

There will be a lot of pressure on the government going into the budget to set out how it intends to support businesses which face staff shortages, with a record 1.1 million job vacancies at present. The Chancellor has already announced a £500 million Plan for Jobs to help people back into work, with the Kickstart Scheme extended until March 2022 and a £3,000 incentive for hiring apprentices until January and we expect to learn more on Budget Day about the specific funding levels for each of these measures.

To further help companies, the government is due to launch the second part of its Help to Grow scheme which began in March this year with support to help managers develop strategic skills. The second part, Help to Grow: Digital aims to give companies free advice on the use of technology and a discount of up to 50% on the cost of approved software worth up to £5,000.

VAT

To help the hospitality and leisure sector through the pandemic, businesses have benefited from a reduction in VAT to just 5%. This month, the rate has increased to 12.5% and it’s due to return to the full 20% in April 2022.

With trade still being disrupted for some, businesses in the sector have been pushing for the reduced rate to continue while they recover. The chancellor may bow to pressure from the sector, although recent figures suggest that other businesses are now in greater need of help now that lockdown restrictions have ended.