Rishi Sunak ‘is extraordinarily articulate’ says John Curtice
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Chancellor of the Exchequer Rishi Sunak unveiled his Budget today, but taxation was not a prominent feature of his new economic plan. He announced that the minimum wage will rise, Universal Credit recipients will receive a boost and warned of four percent inflation going into 2022. Some experts have warned that reforms to wealth taxes could be on the horizon, but they remained unscathed in today’s announcement. Many have suggested that capital gains tax could be aligned with income tax. Nimesh Shah of Blick Rothenberg told Express.co.uk that it will not be aligned with income tax, but the rate will be increased from 2023.
He said: “Aligning capital gains tax with income tax wouldn’t raise a significant amount. I think the estimate is that it would double the amount of capital gains intake but that only stands at £10 billion.
“An additional £10billion would only account for around three percent of total intake. It could force business owners out of the UK as it is a bit of a deterrent.
“I don’t think it will go as high as the income tax rates, but I think capital gains tax will increase not from next year from the year after.
“The Chancellor will stand up next year and say ‘we are going to increase it’ – probably to 28 percent from 20 percent.
“That will serve as a catalyst for people selling their businesses before it comes into effect in 2023.”
If you pay the basic rate of capital gains tax, your bill depends on the size of your gain, your taxable income and whether your gain is from residential property or other assets.
As a higher rate income, the rate stands at 28 percent on your gains from residential property and 20 percent on your gains from other chargeable assets.
Analyst at AJ Bell, Tom Selby, told Express.co.uk in August that it is “very possible” capital gains tax will be aligned with income tax.
Mr Selby said: “The Office for Tax Simplification’s proposals edged towards aligning the two taxes.
“The impact of that would be someone disposing of an asset would pay significantly more tax than they do at the moment.
“There would be a big impact on landlords for example, people who have second properties.
“At the moment, capital gains tax is charged at 10 percent or 20 percent depending on whether you are a lower rate or higher rate taxpayer.
“If this was aligned with income tax, you would be looking at a tax rate of 20 percent, 40 percent or even 45 percent.
“So if you went down that route, anyone with significant assets or multiple properties could see a big impact on the value of their property.”
Another wealth levy that could be reformed in the future is inheritance tax.
The tax is currently paid at a 40 percent rate on anything over £325,000 – this threshold will be frozen until 2026, as announced by Mr Sunak in the March Budget.
Mr Shah told Express.co.uk that inheritance tax rates won’t be changed, but gifts could be targeted to raise more cash.
He added: “They have been talking about reforms to inheritance tax for a long time. They won’t change the rate, the rate is one of the highest in the world at 40 percent.
“What they could do is change the gifting regime. That is generous.
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“They could introduce a lifetime gift allowance like in the US, so you give away a certain amount and anything over that you pay tax on.
That would be unpopular with Tory voters, but I do think at some point we will see reforms to inheritance tax.
“The counter to that is inheritance tax still only accounts for so little, around 1.5 percent to 2 percent of total tax intake.
“Are you really going to solve the problem of more tax revenue through wealth taxes? No. Income tax, National Insurance and VAT account for 75 percent of total tax intake, so that’s where you want to pull your levers down if you want big wins for the Treasury.”
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