Rishi Sunak grilled by Andrew Marr over National Insurance rise
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Mr Sunak is due to announce his Budget on October 27 and many will fear further tax hikes are in store after the Government broke its pledges on National Insurance and the pension triple lock. National Insurance contributions were increased by 1.25 percent, and the pension triple lock was suspended for a year. Now, experts believe Mr Sunak could make changes surrounding student loan repayment and also wealth taxes. The Chancellor may lower the threshold at which people start repaying their student loans, which could save the Treasury about £2billion a year.
Currently English and Welsh students who enrolled at university after 2012 pay nine percent of everything they earn above £27,295 per year.
But ministers have proposed cutting the threshold to as low as £23,000.
Another potential change could impact capital gains tax.
The wealth levy could be aligned with income tax, having already been frozen until 2026 in the last Budget.
Many have suggested that wealth taxes should be targeted as a fairer way to pay for pandemic spending amid the health and social care required in the aftermath.
In April the International Monetary Fund (IMF) said: “To help meet pandemic-related financing needs, policymakers could consider a temporary Covid-19 recovery contribution, levied on high incomes or wealth.”
The IMF’s deputy director of fiscal affairs, Paolo Mauro, added: “Governments could consider higher taxes on property, capital gains and inheritance. One specific option would be a COVID-19 recovery contribution – a surcharge on personal tax or corporate income tax.”
Capital gains tax is currently set at 18 or 28 percent for property depending on which tax band a person falls into.
Figures from the Treasury released in August show that its capital gains tax receipts hit £9.8billion in the 2019/20 tax year, up four-fold from the £2.5billion achieved a decade ago.
The record numbers show how lucrative wealth tax hikes could be for the Government should Prime Minister Boris Johnson take this approach.
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.”
Inheritance tax is also an area that has been put forward as a potential way to raise funds.
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Inheritance tax receipts for the period April to September were up £0.7billion year-on-year, most likely due to higher volumes of wealth transfers during the pandemic, according to HM Revenue & Customs.
Julia Rosenbloom, tax partner at Smith & Williamson, told FT Adviser ahead of the Budget next week that the Chancellor would be looking closely at all areas that might give him additional spending power.
She said: “Prime minister Boris Johnson’s recent announcement introducing a new health and social care levy, which broke a manifesto commitment, demonstrates that the government is not afraid of tax rises.
“Whether any reforms to taxes are announced next week or at a later date, the outlook as to how individuals and businesses will be taxed in the coming years is far from certain.”
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