After digesting more of the detail that underlay yesterdays Budget speech, my biggest takeaway for private individuals is that the Chancellor has managed to both increase tax take... but not raise taxes.... to increase the tax burden on individuals... but also provide much-needed certainty, for longer periods than we have known in the recent past - and with it the opportunity to plan.
From an individual perspective, there are three key announcements in the detail that stood out to me :
- the amount an individual earns before they start to pay tax will increase to £12,570 in April, and the threshold for higher rate tax will move to £50,270 - but then remain at that level until 2026;
- The annual Capital Gains Tax allowance will remain at the current £12,300; and
- the Inheritance Tax threshold will also remain at the current £325,000 - where it has been since 2009.
Without raising the rates individuals will pay, the maintenance of these rates without inflationary increases will see more people each year paying tax as the economy (hopefully) rebounds, and inflation starts to be a more material factor around earnings, growth, house prices and investment return.
Does this make an increasing tax take for the Treasury more palatable? Maybe not... but it does provide certainty over the coming years. And with certainty, there is the opportunity to plan.
For instance, in knowing the Inheritance Tax threshold is to remain at £325,000, people will have a greater incentive in the certainty of understanding the tax burden on their estate to consider their tax planning - to explore available exemptions and reliefs and understand how the costs of planning now could be significantly outweighed by savings in the longer term.
In this case, and especially when set against the unprecedented circumstances (and costs) of the last 12 months, the benefit of certainty for a longer period, and therefore the opportunity for those that wish, to plan for the future, might just be enough to sweeten an overall increased personal tax burden - without tax rates having been raised.
If the Chancellor's announcements have made you consider your own need for tax and estate planning and getting your affairs in good order, do get in touch with Anthony Collins Solicitors private client team - we'd be happy to help.
The UK's tax burden is to rise to its highest level since the 1960s, the Office for Budget Responsibility has said, after the chancellor set out plans to repair the nation's finances. Rishi Sunak used Wednesday's Budget to extend the furlough scheme and higher universal credit payments. But taxes on large company profits will rise in 2023 and 1.3 million more people will start paying income tax.