Photo credit: HM Treasury
The hype is over at last, but the package of Budget measures is quite a mixed bag!
TaxWatch welcomes the targeting of reliefs for inheritance tax and phasing out of business asset disposal relief for CGT, as these were both poorly targeted and used by wealthier taxpayers and their advisers to minimise the amounts of tax paid. But we lament the missed opportunity for more substantial long overdue reform to these taxes in particular, and fear changes to employer NIC worsen compliance problems.
Artful selection of time periods was used to point to investment in HMRC and recruitment of more staff, but the reality is that the department is living with less cash next year than last even before allowing for inflation. Measures tagged at closing the tax gap risk falling well short of their promised contribution whilst complexity within the UK’s tax regime hasn’t been fundamentally addressed.
Whilst much was speculated about changes to pensions tax relief for income tax or NIC purposes, nothing materialised. Sensible changes to the inheritance tax treatment of pensions – used by the wealthy to stockpile cash for their descendants – is being addressed, but only from April 2027. Given the proven abuse of these arrangements, it beggars belief that the Chancellor isn’t acting quicker to close down this loophole.
Today’s biggest tax measure hikes employers NIC to 15% and drops the level at which it kicks in to £5,000 per employee from April 2025. This exacerbates incentives to shift employment into self-employment or using personal trading companies – a known issue of horizontal equity in our tax system. A higher Employment Allowance of £10,500 per employer (up from £5,000 currently) has compliance risks for businesses splitting payrolls and makes HMRC’s tackling of avoidance harder.
There’s much more detail to wade through, and TaxWatch will be putting out more focused blogs in the coming days on other measures that impact how our regime in changing (for the good and the bad). For now we’d conclude that there are too many reforms coming in at different times to be sure whether the Government will achieve its objective to make the tax system fairer and raise revenue to fund public services.
