Time to Talk Tax (again!)
Christmas is normally a time for families to come together and get into the festive spirit and I usually advise clients that it’s the perfect time to discuss succession – while everyone is in one place and are (generally!) in good spirits. Unfortunately this year, some families will not be able to come together in the same way, but it is now more important than ever for those succession and tax conversations to take place.
Throughout 2020, Agri Advisor have released a series of articles detailing reports which have proposed changes to the existing tax regime we have in England and Wales. Firstly, we had two reports in relation to Inheritance Tax, followed by a review of Capital Gains Tax by the Office of Tax Simplification. We have now this month had a report on a possible “Wealth Tax”, although this report was not officially commissioned by the Government.
The report proposes a one-off wealth tax be raised on the total open market value of an individual’s net assets. The report does not go as far as recommending thresholds and rates, as the committee believes that this is a Treasury matter, although the examples given in the report show how much money could be generated from the introduction of such a tax. The wealth tax would be charged on an individual basis rather than per household (although couples could be assessed jointly) and the report recommends introducing the tax immediately so that people do not have the opportunity for any tax planning. The report does not allow for any exemptions, meaning that valuable assets such as farms would be considered as part of an individual’s wealth. The report also suggests that existing taxes are majorly reformed alongside the one-off wealth tax payment. The Chancellor stated in July 2020 that he did not believe it was the right time to introduce a wealth tax, and he didn’t feel it ever would be the right time for such a tax; however, Government spending has increased significantly since July and the deficit will need to be accounted for in one way or another. A wealth tax could deliver a significant amount of money in a relatively short space of time with the report proposing that payments could be made over five years.
On top of all this, the Chancellor has confirmed last week that the Spring Budget will take place on 3rd March 2021. It will be the first formal fiscal event since 11th March 2020 and is expected to detail financial measures in light of Covid-19. However, the Chancellor also confirmed at the same time that the furlough scheme would continue until 30th April 2021 and so it would be fair to assume that the budget will include measures to try to recoup some of the money which has been made available as a result of Covid-19. If the Chancellor maintains his position that now is not the time for the introduction of a wealth tax, we must ask what the alternatives are to raise money to repay the deficit. There has already been speculation that tax raising measures are likely, and although one would hope that any such changes announced on 3rd March 2021 would not take effect until the new financial year, there is no such guarantee, and so now is the time to get your affairs in order. The Conservative manifesto committed not to increase Income tax, VAT or National Insurance, and so Inheritance Tax and Capital Gains Tax could therefore be the taxes up for discussion.
With this in mind, now is the time to talk about tax – discuss your succession plans and make sure they are tax efficient in light of the proposed changes. If you would like to discuss your succession plans further, please contact Manon Williams on 01239 710942.