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Sunak's Budget an act of 'tax avoidance'

Sunak's Budget an act of 'tax avoidance'

Rishi Sunak's Budget this week was an act of "tax avoidance" on the part of the chancellor, according to guests on the latest FTAdviser Podcast.

Having increased national insurance contributions to pay for social care earlier this year, this week's Budget was notably light on many changes to individual taxes - other than alcohol duty.

Speaking on the podcast, Chris Etherington, private client partner at RSM, said: "The key theme of this Budget, in a strange sense, is tax avoidance except this time it isn't tax avoidance with taxpayers, it's the chancellor who's trying to avoid talking about it.

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"He's done a big announcement in September [on national insurance], he really didn't want tax to be the main talking point. He's made a lot of announcements in advance, the tax burden according to the Institute for Fiscal Studies is at its highest sustained level for 70 years.

"Ultimately he doesn't want this Budget to be all about bad news and more tax rate rises."

During his speech, Sunak said his Budget would herald a "new age of optimism" as the UK sought to move beyond the Covid-19 pandemic.

But given increasing levels of inflation, the already frozen thresholds for income tax, capital gains tax and inheritance tax, as well as a frozen lifetime allowance, the panel was sceptical about sharing Sunak's optimism.

Claire Trott, divisional director for retirement and holistic planning at St James's Place, said: "We are seeing an increase in tax. All the noises are 'we are making more money, salaries are going up' but what we do know is the rates at which we are paying and the thresholds are not going up.

"If you just flip that around, people will be paying more tax. [...] Just because he didn't say about income tax particularly, it doesn't mean we aren't effectively seeing an increase for the majority of people, even those people getting the new living wage. I think people will start tipping into taxable income."

Etherington agreed, pointing out the increases to the national living wage would probably be passed on to consumers in the form of higher prices - leading to more inflation.

David Battersby, portfolio manager at Sanlam, said the "good news" Sunak delivered was in large part due to the improving forecasts for economic growth.

But he said: "That is behind him being allowed to be more generous than perhaps he even thought himself and perhaps we have dodged a bullet for now but there certainly will be tax rises further down the road.

"He started off on a very positive note how spending was under control, debt was going down, growth was going up and I did feel he was repeating this a little bit too often and you then start to question when you say it too much."

To listen to the full podcast click play on the player above. FTAdviser's podcasts are also available on Apple Podcasts, Spotify, Stitcher and Acast.