Rishi Sunak: What to expect from budget with Victoria Scholar
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The Autumn Budget 2021 will be delivered on Wednesday, October 27, and given the huge financial and human cost of the Covid pandemic sweeping changes are expected across many areas of the economy. Britain is at a critical juncture in terms of its economic future with the Treasury and Rishi Sunak seeking to balance rising living costs, increasing Covid cases with the need to repay the huge Covid bill. Express.co.uk has compiled a guide to the nine ways the Chancellor’s Autumn 2021 Budget could impact you and your taxes from National Insurance Contribution hikes to the cost of your pint costing more.
The Covid pandemic cost Britain an estimated £370 billion from February 2020 to July 31, 2021, according to the National Audit Office.
This estimate covered all measures for which Government departments are responsible, whereas figures of £129bn and £261bn were the estimates for the loan or guaranteed amount provided to the Government from the Bank of England and the amount the Government is known to have spent on Covid measures for the period outlined.
These costs were predominantly spent on support for jobs such as through the furlough scheme and to help the NHS and other public services combat the coronavirus pandemic.
The Government cannot keep borrowing at these levels forever and therefore must cut spending or increase taxes to cover this cost.
The Chancellor of the Exchequer has already revealed there will be an increase in national insurance contributions to provide more money to the NHS.
These increased NI contributions will also potentially in the future provide more funds to social care.
Many Tory MPs have announced they would like to see tax cuts and Mr Sunak has hinted he intends to cut taxes ahead of the next election.
On Sunday, Mr Sunak said cutting tax was “what my instincts are”.
He added: “But you also have to take a step back and think, what have I and the government had to grapple with over the past year and a half?
“We’ve had the biggest economic shock that we’ve experienced in 300 years.”
Capital Gains Tax
A hike of 1.25 percent for the NI Contribution rates and higher taxes on dividend income were announced earlier in 2021.
Mr Sunak could however soon announce further broad-based tax hikes.
Many experts believe Capital Gains Tax could soon be hit with increases in this week’s Budget.
Increasing “wealth taxes” has been hailed as a popular move to help restore the country’s finances after the pandemic and CGT is a tax on the profit made following the disposal of an asset such as property or investments which means it is a tax which hits wealthier individuals.
The Office for Tax Simplification completed its review of CGT in May and recommended changes such as aligning CGT rates with income tax rates.
Currently, this tax is charged at 10 or 20 percent or for property at 18 or 28 percent depending on the tax band the individual is in.
Capital Gains Tax is charged at a lower level than income and many critics believe it should be equivalent to that level – but this type of major change to CGT is deemed unlikely for some experts.
Inheritance Tax could soon be changed as the Chancellor has come under increasing pressure to review it.
Others however only expect this tax to be “tinkered” with rather than larger sweeping changes to be undertaken.
IHT receipts have continued to surge recently, with data released from HMRC showing receipts for April to September 2021 were £3.1billion – £700million higher than the same period a year earlier.
Dividend tax will increase by 1.25 percent which means investors will have to pay more on their earnings.
This will mean next April basic-rate income taxpayers will pay 8.75 percent with higher-rate taxpayers charged 33.75 percent.
This move is expected to raise £600m for the Government.
The Treasury has also revealed the £2,000 tax-free allowance will remain the same.
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Higher Council Tax bills could soon be rolled out across the country with many experts predicting the rate could increase by as much as five percent from next April.
Millions of households will be hit by this increase, particularly as energy prices are expected to rise as well putting greater financial strain on households.
Local councils need more money to help communities in the wake of the Covid pandemic and many councils have pitched new social care plans which need Government funding.
If councils do not receive the necessary funding from the Government it will have to go to the public and Council Tax hikes are anticipated to fund this.
The IFS has already predicted a potential increase of around £240 to average bills in the next few years if more central Government funding is not given and even its best-case scenario sees an extra £160 added to bills in the next few years.
A trim to business rates has reportedly been ruled out by the Chancellor given the Covid-hit public finances.
However, the Government’s response to a review of business rates undertaken this Autumn could see meaningful changes made to how the system functions.
The cost of business rates may not alter, but there is likely to be a shift in the reporting requirements needed by the Valuation Office Agency as the Government seeks to get real-time information and ensure rates truly reflect the realities of the rental market.
Local councils are dependent on income from business rates and therefore given the financial strain some councils are currently experiencing it is possible the Government could use this form of taxation to raise much-needed funds.
Mr Sunak is likely to speak about the Residential Property Developer Tax on Wednesday which will come into force from April 1, 2022.
This tax aims to ensure the biggest developers are making a “fair contribution to help fund the Government’s cladding remediation costs”.
Several properties have been unmortgageable as a result of the cladding crisis and many owners are calling on the Government to help with this crisis.
The Government may also seek to make changes to the Stamp Duty system – but some believe this could be delayed as a result of the changes undertaken amid the Covid pandemic.
Ahead of COP26 and with the greater focus on green homes – it is likely the Government will unveil greener home schemes for first-time buyers and property owners.
Online sales tax
Online shoppers could soon be hit with higher costs under new plans in the Autumn Budget outlining a possible two percent sales tax increase.
The so-called Amazon tax has been discussed as a means of levelling the playing field between brick and mortar stores and online giants.
Businesses currently pay almost a quarter of the total business rates burden which represents just five percent of the economy – it is possible the Government will seek to close this gap going forward.
Fuel duties and alcohol levy
Tax on petrol and diesel has been frozen for the past 11 years but many experts believe this will change in the Autumn Budget 2021.
Prime Minister Boris Johnson has thus far refused to rule out a rise in fuel duty.
However, given the recent petrol crisis has prompted an increase in prices the Government may opt to delay this tax increase until fuel prices have the opportunity to fall.
Alcohol, duty is another levy which could possibly increase after a review on beer, cider, wine and spirits was undertaken.
Rates on alcohol have been frozen since 2017.
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