What would we like to see in the budget next week?

The spring budget is imminent and with a general election due The Chancellor turns his attention to potential tax cuts. Here are the potential changes that we think could be in the spring budget.

Could the basic rate of Income tax come down?

Rishi Sunak pledged to reduce income tax by 1p in the £1 but there is further speculation that a potential reduction of 2p is under consideration bringing the basic rate down to 18%.

Since 2021/2022 the personal allowance has been £12,570 with 40% tax kicking in at £50,270. These bands are due to be frozen until April 2028 resulting in fiscal drag as more taxpayers pay higher rates. This is compounded during periods of high inflation. Early review of this policy surely would be welcomed by the middle classes who since world war two have never been taxed so much.

Reduction or abolition of Inheritance Tax?

Inheritance tax impacts just 4% of estates but there is much interest in simplifying the tax system. This tax is particularly hated as it is seen by some as taxing twice as often the estate is as a result of saving income that has already been taxed.

The tax is levied at 40% on the portion of the estate over £325,000. It could be that the thresholds are revised or that the rate is reduced or abolished altogether.

No doubt this could be seen as the conservatives looking after their own.

Capital Gains Tax threshold cuts to be aborted?

Reducing the CGT exemption and the dividend allowance is seen as anti investor and anti entrepreneur. Could The Chancellor look at this again and be more supportive of investors and entrepreneurs?

In 2022/2023 the capital gains tax exemption limit was £12,300. It has been reduced to £6000 already and is due to reduce again to £3000 from April 2024.

Similarly, the dividend allowance has been reduced from £2000 to £1000 and will reduce again to £500 from April. When first introduced the allowance was £5000 ! Ten times the current destination !

If the government did look at its plans again the result may be that it would aid growth and foster investment for UK businesses.

VAT Threshold increase?

An increase in the VAT threshold that currently stands at £85,000 and has been at this level since 2017 will surely have a positive impact on the economy and encourage growth.

In order to avoid VAT liabilities small businesses choose not to grow beyond this threshold. Increasing the theshold is surely a strategy to encourage growth.

Park Lane Accountants can help you understand what impact the budget will have on you and your business. We can help you plan and advise you on all aspects of tax. Call us on 01249 247160 or book a call here.