Sweeping tax changes could come into force following publication of the House of Commons Treasury committee report ‘Tax After Coronavirus,’ which was published at the start of March. Reform has already begun on reforms to Capital Gains Tax (CGT) and Inheritance Tax (IHT), while some of the areas recommended for action have already been addressed in the Budget of March 3.
These include the threshold on the amount you can earn each year before paying any income tax being frozen and that Corporation Tax would rise from its current rate of 19 per cent to 25 per cent in 2023.
The report notes that Income Tax, National Insurance and VAT made up 66 per cent of the 2019/20 total tax yield. However, any slight upward movement in the rates of any of the three would generate a substantial amount of extra tax.
In addition, a proposed windfall tax of 10 per cent could be levied on those businesses that have thrived during the pandemic, but there are reservations about a one off wealth tax.
Standard rate of VAT could see an increase, while the median rate of VAT in the EU is 21 per cent so this would not be seen as too damaging.
Businesses need to be prepared and this is where experts Macalvins can help, providing advice on tax matters.
Areas under review:
- Taxing income from work – Should the income of the self-employed be taxed at the same rate as employees?
- Limited companies – It was recommended that, if the tax advantages of self employment are to be reduced, so should the tax advantages of operating through a limited company, relative to the taxation of employees.
- Reform of capital gains and inheritance tax was needed and should continue to proceed with reviewing the previous proposals.
- Stamp duty land tax is seen as economically inefficient and damages the economy and should be treated as a priority area for review.
- The committee recommended a review of business rates takes place to reform the functioning and application of business rates.
- The report says the council tax is an outdated system with bandings that are in some cases 30 years old and should be reformed.
Get in touch with Phil at Macalvins now to book an initial free consultation.