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Yesterday, the Chancellor’s spending review outlined the Government’s plans for the economic challenge ahead as the UK looks to recover from the coronavirus pandemic. Rishi Sunak sparked heated debate as he announced cuts in foreign aid from 0.7 percent of national income to 0.5 percent. But many are also wondering how the pandemic will impact their pockets directly, and Mr Sunak today refused to rule out tax hikes. Speaking on the BBC, he said the current level of spending was “unsustainable”.
Asked if the tax lock still applied, he added: “I’m not going to be drawn on future fiscal policy.”
A number of tax policy changes have been proposed to help the country pay for Government spending on the furlough scheme and other interventions.
This includes inheritance tax and capital gain tax, which some experts believe could be impacted in the near future.
Lesley Davis, partner in the private client team at law firm Shakespeare Martineau, said earlier this month that inheritance and gifts could be targeted.
She said: “No matter which of these elements of inheritance tax are targeted, many individuals and families will be hugely affected.
“An increase in capital gains tax could mean a large reduction in profit on the sale or transfer of capital assets.
“For those who have been planning on selling or passing on their estates for some time, this could cause a variety of financial issues. It might seem that a change to these taxes will only create problems for the wealthy, but this isn’t strictly true.”
Ms Davis advised that gifts can be given now in order to avoid any hikes in the future.
She added: “Anyone who owns their own home and has a level of savings could well find themselves impacted, making them less able to pass on their assets to their children in future.
“To mitigate these impacts, lifetime gifts made now either directly or into a trust could offer some protection. People should also ensure they have properly structured wills that provide the flexibility to move with changes in tax legislation.”
Mr Sunak has received mixed feedback during the pandemic, with some praising the furlough scheme while others say support hasn’t gone far enough.
Tax Research UK’s Richard Murphy told Express.co.uk that the Chancellor was complacent.
He said: “At first, Rishi Sunak completely underestimated what was going to happen, it was a complete disaster, because he hadn’t realised how disastrous coronavirus was going to be.
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“But he was back a week later with the furlough scheme, it was smart, quick, some people lost out when they shouldn’t have done.
“But overall it has worked and they did a good job – but now Sunak’s obsession with debt is kicking in again.
“If he opts for austerity and tax hikes, then frankly we are heading for depression rather than a recession.”
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