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The autumn budget was announced on 27th October 2021 by the Chancellor and exchequer Rishi Sunak. A lot of the budgetary reforms were pre-announced, but a couple of new revelations followed it.
According to Rishi Sunak, the budget is more likely to take the pandemic out of the recession phase, uplifting the GDP and the numbers taking the country back to normal times.
The Capital Gains Tax increase (CGT) has been the biggest question initiated by private client advisors over the past couple of years. Very likely expected, once again, there hasn’t been any announcement regarding changes in Capital Gains Tax (CGT). Over the last twelve months, asset sales have increased by around 2% to 11.5% of the tax revenue. This is largely because of the nervousness with regards to the fact that the Chancellor would bring CGT more in line with income tax, but this did not materialise again.
Perhaps, this is likely to be combined with a complete overhaul of capital taxes, including inheritance tax (IHT).
Currently, only 4% of the country’s population pay Inheritance Tax (IHT), making it appear the most unfair tax.UK is one of the minorities amongst OECD countries that taxes the estate of the deceased rather than the recipients. This is perceived as a double tax charge as citizens feel they are being charged on the amount that they have already been taxed for, and now this income they earn to buy the asset they want to pass on to loved ones. Given how property prices in the UK have particularly rocketed, it can be difficult to balance the contribution from the wealthiest in the society more from the growth they have done little to earn, instead of increasing tax on earnings for lower-paid.
In 2019, the OTS released a report on suggested reforms to IHT. Amongst all the suggestions, one of the most radical was the removal of business relief, exempting the value of a business from IHT. This would bring possibly the largest most valuable asset of the family into charge at a rate of 40%, predominantly affecting wealthy family businesses.
The biggest overhaul to the tax regime in years would be the changes suggested. Now, it seems these have been shelved along with CGT, allowing some to breathe a sigh of relief for now.
The latest general election is just two years away, and still, it seems difficult to see how these changes would be implemented under a conservative Chancellor any time soon.
The above opinions and insights are coming from Rebecca Durrant, Partner and National Head of Private Clients
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