Tax implications for the UK post-Covid
Now the bills for dealing with the Covid-19 pandemic have started to arrive, attention is turning to how these will be paid. Inevitably there is a tension between the public purse and how much remains in a taxpayer’s pocket. The Scottish and UK Government may be minded to recall Jean‑Baptiste Colbert’s quote from the late 1600s “the art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing”. As a country we have become used to relatively low rates of taxation, given the rates back in the 1960s and 1970s which at one point reached over 100%, but it appears now that current tax rates will be increased, at least for a period.
Income Tax and Capital Gains Tax are the two which will affect most individuals. Income Tax is further complicated by the Scottish rate of Income Tax applied to earned income under which Scots now have the highest rates of Income Tax in the United Kingdom. Is there much scope for further increase without causing a stampede across the border? Capital Gains Tax of all the taxes is almost a voluntary tax incurred by those who choose to pay it, and generally it is the tax that causes most issues within any tax planning exercise. Traditionally it has raised more for the Exchequer than Inheritance Tax, which was in the news 18 months ago following the publication two Office of Tax Simplification Reports. Since then there has been singular silence from the UK Government possibly because its amendment will be extremely complicated and require considerable amount of thought around its interaction with other taxes, particularly Capital Gains Tax. The chances of Inheritance Tax being substantially amended at this stage are I think remote (famous last words) but there may be a considerable amount of thought given to amending the various allowances relating to pensions under Income Tax, but also the sale of businesses and reinvestment of the sale proceeds of business assets for Capital Gains Tax. The amendment of allowances is always complicated and inevitably leads to unintended consequences so as usual in the next budget, whenever that might be, careful attention will have to be paid to the small print.
In the meantime, if it does not prejudice your own financial position, perhaps thought should be given to maximising the use of various allowances or taking advantage of the relatively low tax rates in moving assets between the generations, just in case they are changed. If you have any questions regarding this article or wish to discuss you own tax planning, we can help.
To receive regular updates like this one, you can sign up to our bulletins by clicking here and we will provide updates on the issues that matter to you.Back to news list