Opinion  

Are we heading for the big tax freeze?

Simoney Kyriakou

Simoney Kyriakou

In recent years there have been more leaks of the content of pre-financial statements than in the Titanic's hold.

So it comes as no surprise to learn the newest chancellor, Jeremy Hunt, has expressed an intention to freeze inheritance tax thresholds further. 

It would not be surprising, either, if the government did not apply freezes again to the lifetime allowance, tinker around with dividend taxes, and extend the 'one-off' temporary double lock on the state pension.

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Then there is the perennial question of whether this will finally be the year that the Treasury takes the axe to higher-rate pension tax relief. 

Some speculators have suggested the demise of this tax is inevitable, given the total net cost of pension tax and national insurance relief was estimated at nearly £50bn in 2020-21.

Moreover, it would not surprise me if the government attempted to disentangle itself from election promises to maintain the triple lock on pensions, although if the government does so, how much of the party's old election promises will it actually be upholding?

And if the answer is not enough, will it still have a mandate to govern?

Questions of political mandates aside, there are two truths that have to be universally acknowledged:

  1. The UK economy has a massive hole in its finances, out of which it must climb eventually.
  2. The voting population is not going to take kindly to more or new taxes.

Either way, the Treasury must steer the UK between the Scylla and Charybdis of unpleasant tax decisions and the need to keep voters on-side.

So if the chancellor is to find money from somewhere for the growth plans they have for the UK (and former prime minister Theresa May told us there was no magic money tree), where will that money come from?

People on the cusp of retirement? Potential Tory voters?

The LTA was already frozen in 2021 at the current level of £1,073,100 until at least the 2025-26 tax year.

If the LTA had increased by inflation last year and from April 2022 in line with the CPI, people approaching that limit might be feeling more cheerful. 

But there is no reason to cheer, and until we know where Hunt is going to get money from to feed the ravenous maw of government spending, we should not be shocked if the LTA freeze is to continue for longer. 

I would not be surprised, either, if another hike to the state pension age gets put back on the table. 

Bit by bit savers are being frozen out at a time when families across the UK risk being frozen in their own homes, thanks to exorbitant energy prices and double-digit inflation. 

Maybe the chancellor will show a shiny spine and start cracking down on large companies that do not pay their fair share of tax to the UK.