Tax and accounting specialists RIFT Tax Refunds unveils what it would like to see in today’s Spring Statement, which takes place at around 12:30pm.
Personal Allowances and Tax Thresholds
- Personal allowance and threshold information is quite limited, although there are some reports that the Chancellor is planning to extend the freeze on income tax thresholds in the spring statement.
- The thresholds are currently frozen until 2028, and by freezing them further, she will effectively bring more people into taxation, or tax them at higher rates if wages rise by inflation. This will only encourage fiscal drag.
- A wealth tax is not expected tomorrow and would prove deeply unpopular, particularly after last year’s tax-raising Autumn Budget. The headlines are already full of stories of millionaires leaving Britain thanks to high taxes and plans to abolish the non-dom status.
The fiscal drag created as a result of a freeze on income tax thresholds is the government’s way of raising taxes without actually raising taxes.
Given that we’re now seeing a strong rate of increase with respect to the average earnings, the reality is that we will continue to see an even greater proportion of the working population paying more in tax as a result and we urge the government not to extend this freeze beyond 2028.
Inheritance tax
- While more changes to IHT are not expected, the changes announced in the autumn are yet to kick in and will increase the IHT substantially over the next few years.
- The previous changes include; capping of 100% Business Property Relief and Agricultural Relief at £1m from April 2026; and bringing pensions within the scope of Inheritance tax from April 2027. These were not well received and this has led to speculation that there might be changes to these proposals.
The changes to Inheritance Tax proposed in the Autumn Statement have proved to be significant and whilst they are yet to be introduced, they are likely to have a huge impact, particularly across the agriculture sector.
These changes would also see any unused pension pots pulled into the value of the deceased estate and liable for inheritance tax changes.
Given the huge sums that the government already pockets from inheritance tax, you have to question if the latest changes are necessary, as they further fuel what many already view as a rather contentious death tax.
National Insurance
- The 2% increase in the rate of employer National Insurance mentioned in the Autumn Budget is due to kick in from April, and the level at which employers start paying NIC will reduce from £9,100 to £5,000. The long-term outlook is likely to be workers facing lower pay rises or also job cuts.
- Despite the potential challenges, it seems unlikely that the Gov will reverse this in the Spring Statement.
The changes to National Insurance employer contributions are set to come into effect from April but they’ve already had a disastrous impact on British businesses, driving widespread redundancies from those businesses who simply can’t afford to stomach the increased cost.
It’s likely that those who have remained in employment will also be hit by a reluctance to increase pay over the coming year, at least, and we would urge the government to consider if such a move is the best way to stimulate the economy given the fallout that has already materialised.
Capital Gains Tax
- Previously, Capital Gains Tax rates have been aligned so all assets are taxed at 18% or 24%. Business Asset Disposal Relief (BADR) relief rates are also being increased over the next two years from 10 per cent to 14 per cent then 18 per cent.
- There was some previous speculation that the Chancellor may align CGT rates with income tax rates. Could we see this?
Despite the rumours, the government’s move not to align capital gains tax rates with income tax rates in the Autumn Statement was warmly welcomed and whilst it’s unlikely to materialise this time around, there will still be an air of anxiety in the lead up to tomorrow’s Spring Statement.
Such a move would significantly dampen investor appetites, particularly across the buy-to-let sector and this could see even few landlords investing, which in turn will reduce the level of rental accommodation available, intensifying the tough task faced by the nation’s tenants.
Council Tax
- Council tax will increase in 2025-26
- In England, there will be an increase from £2,171 to £2,280 (average band D) = annual est change of 5%
Whilst we’ve seen a fairly strong and consistent level of earnings growth of late, the average household is still contending with a very high cost of living and a further hike to council tax costs will only put further financial strain on them.
Stamp Duty
- Nothing expected for general homebuyers other than the upcoming changes (ending of the holiday) from April 1st 2025.
- Experts fear that Rachel Reeves could lump further tax misery on landlords this week by once again raising the stamp duty surcharge on second home buyers.
- Although the Chancellor insists she won’t be putting up taxes this week, that may relate more to income tax and national insurance, so there is some risk when it comes to SDLT.
Whilst the government has been vocal in its ambitions to deliver a higher number of homes to the market, they’ve done very little to help those homebuyers already struggling with the high cost of homeownership.
The failure to extend current stamp duty relief thresholds will further increase the cost of buying for a significant proportion of the market, but unfortunately, it seems as though calls to extend these relief thresholds beyond the end of this month have gone unanswered.
However, we would see a further bump to second home stamp duty costs which would act as a further deterrent to the nation’s landlords.
