With the Chancellor mulling over the potential measures that he could bring in at Wednesday’s Budget, we thought it would be fitting to see what our readers want to see included in the announcement.
Last week FTAdviser did just that – and the results are in.
The most popular measure was an increase in capital gains tax (CGT), and although nothing has been officially announced yet, speculation has been rife on the topic.
The Office for Tax Simplification recommended an increase to CGT to more closely align it with income tax, saying the disparity distorted taxpayers' behaviour.
This was because many investors actively sought to create gains taxed at a top rate of 20 per cent, compared with income which can be taxed as high as 45 per cent.
However, Mr. Sunak will be all too aware of the fact that CGT does not raise much revenue when compared with other taxes. In fact, CGT accounts for approximately £9.5bn in tax revenue from fewer than 300,000 taxpayers each year.
With £2trn in national debt, CGT reform may not be key to Sunak’s pandemic recovery.
We asked our readers which of the following Rishi Sunak should go for in the Budget:
|Cut pensions tax relief||24.6%|
|Raise capital gains tax||41.9%|
|Increase national insurance contributions for the self-employed||27.1%|
|Increase inheritance tax||17.2%|
|None of the above||23.4%|
The second most popular measure was an increase in national insurance for self-employed workers.
The chancellor has previously said that taxation of the self-employed would come under review, saying last March: “It is now much harder to justify the inconsistent contributions between people of different employment statuses. If we all want to benefit equally from state support, we must all pay in equally in future.”
Alistair Cunningham, financial planning director at Wingate Financial Planning, said now may not be the right time for a tax hike, a sentiment echoed by MPs.
He said: “I can see there would be sense in harmonising national insurance and income tax, but we’re still in a pandemic and possible recession, and with tax rises having a minimal impact on actually paying down the £1tn+ debt we now have I would suggest taxation should stay the same or fall, and public spending rise until we can see the end of this mire.”
The third most popular measure, a cut to pension tax relief, has also been recommended to the chancellor by the Treasury Select Committee, after being identified as the second most expensive tax relief, costing £20.4bn in 2018-19.
An increase to inheritance tax was also a popular response.
We will have to see on Wednesday whether the ideas of FTAdviser readers will come into fruition, or whether the Chancellor has kept some secrets up his sleeve.
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