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The UK is on course to see its biggest tax rise in at least 50 years as a result of the freeze on personal thresholds and soaring inflation, according to analysis from The Resolution Foundation.
The think-tank said taxpayers are set to pay over £40 billion a year by 2028, up from a forecast of £30 billion at the time of the March Budget.
A four-year freeze in personal tax thresholds – the Personal Tax Allowance and Higher Rate Thresholds for Income Tax – was first announced in Budget 2021. At the time, it was forecast to raise £8 billion a year once fully rolled out in 2025/26.
In Autumn Statement 2022, this was supplemented by a two-year extension of the policy through to 2027/28, and the addition of an employer National Insurance threshold freeze, which raised £6 billion.
The more recent inflation shock has significantly increased the size of this tax rise.
Adam Corlett, Principal Economist at the Resolution Foundation, said: 'Abandoning the usual uprating of tax thresholds is a tried and tested way for governments of all stripes to raise revenue in a stealthy way.
'But it is the far bigger than anticipated scale of the government's £40 billion stealth tax rise that stands out.
'The reality of the largest, and ongoing, tax rise on incomes in at least 50 years is why any talk of pre-election tax cuts will inevitably be seen in the wider context of some far bigger tax rises.'
The Institute for Fiscal Studies (IFS) has stated that this has been the biggest tax-raising parliament since records began, pushing UK tax revenues to historically high levels.
They comment “At the time of the last general election, UK tax revenues amounted to around 33% of national income. By the time of the next election in 2024, on current forecasts, taxes will amount to around 37% of national income – a level not sustained in the post-war period. Compared with a world in which taxes had stayed at 33% of national income, the UK government will be raising upwards of £100 billion more in tax revenues next year. This is equivalent to around £3,500 more per household, though of course the tax rise will not be shared equally."
So are there any tax Planning opportunities ahead of the new tax year?
The new tax year starts 6 April 2024, so you have six months to consider your planning options. Once we pass this date the majority of the tax planning options for Income Tax and Capital Gains Tax purposes will cease unless actioned.
Do you fall into any of these categories?
If you do, we can help you discuss your options ahead of the April 2024 deadline.
The above list is not comprehensive, and we specialise in helping clients with all taxes including PAYE, NIC, VAT, Corporation, Capital Gains, Income and Inheritance tax. Please contact us now!
Brearley & Co Accountants are pleased to offer a free, no obligation, initial consultation with one of our experts who will be happy to discuss your business needs and how we can help you.Contact