As speculation mounts that Chancellor Rishi Sunak will hike taxes to pay for the vast public spending triggered by the Covid-19 crisis, commentators have warned higher earners to take steps to mitigate the impact.
According to reports, the Treasury is drawing up plans to raise between £25- £30 billion a year, with a raft of new measures set to be unveiled in the Autumn Budget. These potentially include an increase in capital gains tax, corporation tax and income tax as well as inheritance tax. A reduction in pension tax relief has also been mooted.
It comes as the UK battles its deepest-ever recession and Government debt stands at around £2 trillion.
Nigel Green, CEO and founder, deVere Group, said: “Major tax raids and relief cuts are on their way and it is higher earners who are going to be targeted. As such, these people would be wise to take steps now – ahead of the November Budget – to mitigate the impact.
“They should be considering all the available and legitimate financial planning options available to them, including international options, in order to grow and protect their wealth.”
A previous survey carried out be deVere found that six out of 10 higher earners are concerned about the adverse impact of the 2020 Budget on their assets.
Green continued: “Mr Sunak should resist the simple ‘soak-the-rich’ measures. He should not try to tax his way out of the downturn – instead, he must drive long-term sustainable economic growth policies.
“Whilst this way would be more effective, it is harder to do both economically and politically, and is, therefore, unlikely to happen.”
Luke Davies, CEO and founder, IW Capital, says the Chancellor should take a long-term view to the public finances.
He says: “Creating an eco-system for businesses to thrive, grow and hire more workers is a sure fire way to increase tax receipts in the long run and while immediate tax increases give an immediate result, it is often lower taxes that see long-term success.”
Davies points to the increase in EIS income tax relief from 20% to 30% in 2011, which resulted in a significant increase in the amount invested in small companies. According to Davies, the Chancellor should be following a similar direction as the economy seeks to recover.
He added: “The SME economy is one of the most important and exciting assets the UK has. SMEs make up 99% of businesses in the private sector and employ over 16 million people. As well as this it was an area creating jobs rapidly before lockdown measures came into effect, returning to this will be what helps us recover.”
