Autumn Statement: Hunt announces tax rises
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The Chancellor Jeremy Hunt has halved the capital gains tax threshold, taking it from £12,300 to £6,000. It will then be cut to £3,000 from April 2024. Tommy McNally, leading tax expert and CEO of tax-refund app, Tommys Tax, said the tax changes would have an “extreme impact” on struggling Britons.
He said: “Jeremy Hunt has reduced the exemption for capital gains tax from £12,300 to £6,000, while dividend allowance will be cut from £2,000 to £1,000.
“This is set to directly affect business owners and retirees who rely on dividend income to supplement their pensions.
“Today’s newly-announced tax changes are set to have an extreme impact on taxpayers already struggling to keep up with rising bills.
“According to a new study, over 21,000 taxpayers have arranged to pay their bill in monthly instalments beyond the deadline for the 2021-22 year – a 22 percent increase from last year.”
The tax expert also said: “Taxpayers must ensure that they are aware of the new tax regulations so that they are aware of the correct amounts they should be paying.
“With HMRC under relentless pressure due to the increased number of audits alongside September’s disastrous mini-Budget, people looking to file their tax return should start the process now to reduce any chance of penalties when submitting.
“Our research shows that over a fifth of Brits feel that tax is their biggest financial burden which they are least prepared for.
“With the cost-of-living crisis, and now a string of tax changes, the number of taxpayers unable to pay their bill is only set to continue rising without adequate information and education round the topic.”
Jamie Morrison, head of tax at accountancy firm HW Fisher, warned before the Autumn Statement announcement that slashing the capital gains allowance would mean tens of thousands of Britons being hit by the tax.
He said: “The OBR estimates that for the current tax year, capital gains tax accounts for £15billion of overall tax receipts – but this only represents 1.5 percent of all UK tax receipts.
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“This explains why the Government would have to make a significant change to capital gains tax for it to result in a substantial and meaningful contribution to the Treasury.
“If the new Chancellor decides to halve the £12,300 tax-free allowance for capital gains to £6,150, tens of thousands will find themselves paying the tax for the first time.
Laura Suter, head of personal finance AJ Bell, said ahead of the Budget that increasing capital gains tax could be popular with the public.
She said: “Capital gains tax already generated £14.3billion last year for the Government, with rising asset prices, house prices and frozen allowances all helping to push this up by 42 percent in the past year.
“A hike in rates from the current 10 percent to 20 percent for basic-rate payers, or 20 percent to 40 percent for higher rate payers would significantly boost Government coffers.
“A less radical move would be for the government to cut the tax-free allowance from its current £12,300.
“The allowance has already been frozen until 2026, but Rishi Sunak could go one step further and cut the allowance.
“Chopping it in half, to £6,000, would generate £480million, while cutting it to £2,500 would give an £835million boost to government coffers, according to OTS predictions.”
Stuart Scott-Goldstone, partner and head of the Corporate & Commercial Team at legal firm Aaron & Partners, said in his predictions that any changes will likely come into force next year.
He said: “At his long-awaited Autumn Budget on Thursday, we know the Chancellor may target Capital gains tax (CGT) in a bid to bring in much-needed funds for the Treasury and to plug the £50billion black hole in public finances.
“That could mean a reduction to the current £12,300 annual exemption, or aligning CGT rates to income tax.
“Either of those moves could generate billions for the public purse, possibly to the tune of £14billion or more, assuming taxpayers do not change their plans or behaviours as a result.
“Even though they may be announced, it’s likely that any changes may be further down the line, with policies coming into force in April 2023.
“In the short term this could inject life into the markets and we could see a flurry of sales, mergers or acquisitions before these changes come in, not only stimulating the market for corporate deals but accruing Treasury funds too.
“In the long term, it may mean more creative tax planning comes into play in order to avoid the highest tax charges.”
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