While there have been hints of tax cuts, many are still predicting the Autumn Statement to be quite a bland affair as the Government readies itself for a General Election next year, perhaps with more promises for the future than actual action. However, there are still many changes that could be introduced, or re-introduced, that would help boost the economy and put money back into the pockets of ordinary people.
Julia Rosenbloom, tax partner at law firm, Shakespeare Martineau, discusses changes she would like to see in the Autumn Statement:
1. Introduce business property relief for property investment portfolios
“Currently, people who have small or large property portfolios are not entitled to the same Inheritance Tax relief that other businesses enjoy. While for some renting out a second property is just a bit of extra income or ‘side hustle’, for others it’s a full-time job.
“Like any other family business, landlords are keen to pass down their assets to their children or grandchildren, however currently they have to pay a sizeable amount in Inheritance Tax, which is not required of other businesses. Not only is this a question of fairness, but it can have a knock-on effect to the tenants where properties have to be sold to fund the Inheritance Tax bill.”
2. Raise Income Rate Tax thresholds
“The Government has chosen to freeze the income tax thresholds for the past four years. They’ve not risen in line with the cost of living and have pushed more people into higher tax brackets. By raising the thresholds for Income Tax it would be more reflective of people’s true earnings, and take into account the rising cost of living, inflation and other financial pressures.”
3. Simplify Stamp Duty Land Tax
“Stamp duty land tax is ripe for simplification. It started out as a relatively straightforward tax, calculated by applying a certain percentage to the value of a property, but over the years, establishing what that percentage is has become more challenging. “Surcharges” can be added in certain circumstances, including acquisitions of second homes or by companies but the rules are highly complex. Even the process of replacing one main residence with another can invoke some complicated rules in anything but the most straightforward of cases.
“The complexity of the system means people often find themselves paying the wrong amount of tax and specialist advice is often required to ensure the correct amount is paid and at the right time. This added burden is unhelpful to the property market, as well as those buying property who might already be struggling with saving up for a deposit and funding higher borrowing costs.”
4. Simplify pension rules
“Simplifying pensions should be a high priority for the Chancellor, who should be particularly focused on the tapered annual allowance. Pensions are exceedingly complicated for everybody, however for those earning above £200,000 per annum, or those who have an adjusted income that surpasses £260,000, a tapered annual allowance, which reduces according to the earnings, makes them even more of a headache.
“The tapered annual allowance means that high earners are only able to contribute a reduced sum to their pensions. It also means that the exact figure is not calculated until the end of the tax year because the calculation relies on their total earnings for the year, which puts more pressure on the system.
“Despite being targeted at higher earners, simplifying the tapered annual allowance would be a popular move and one step further in smoothing out a complex pensions landscape.”
5. Reintroduce Indexation Allowance
“When an asset is sold, the increase in its value from the time it was initially purchased is subject to Capital Gains Tax. However, as a result of fluctuating inflation, people are currently paying tax on inflation which increases the amount they are liable to pay, rather than just paying against the asset’s ‘true value.’
“Reintroducing an Indexation Allowance, which was abolished in 2008, would ensure that the amount of Capital Gains tax paid is a true reflection of an asset’s value – a much fairer way of calculating the real gain.”
The Autumn Statement is an opportunity for the Government to really help people during a turbulent economic period. The overriding wish is that the Government introduces some immediate measures that relieve the burden on the taxpayer, rather than simply creating a roadmap for the future, should they remain in power.