Chancellor of the Exchequer Rishi Sunak delivered a summer statement this week, during which he announced an update to his plans for steering the economy through the coronavirus crisis. In response to the COVID-19 pandemic – which has seen the UK being placed in lockdown for months this year in order to try to slow the spread of the virus – the Chancellor rushed out emergency measures, estimated to cost £133billion, according to the Office for Budget Responsibility (OBR).
While the autumn Budget is still some time away, many have been considering the potential options which the Chancellor may consider, following the significant public spending.
Among those giving their expert perspectives is Lesley Davis, partner in the private client team at law firm Shakespear Martineau, who has shared her thoughts on where Mr Sunak may make tax changes.
Speaking exclusively to Express.co.uk, Ms Davis said: “The Government will have to recover costs somehow, and the capital taxes are the obvious target.
“This includes inheritance tax and Capital Gains Tax, which are both easy hits, as exemptions can simply be withdrawn or removed.
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“However, doing this leaves the taxpayer fully exposed.”
So, how could possible changes impact members of the public when it comes to the different tax bills?
“If the Potentially Exempt Transfer exemption is removed, Inheritance Tax will become payable on any gifts over just a few hundred pounds in value,” said Ms Davis.
“More concerningly, if spouse exemption on death is cut then families will have to sell their assets to pay the tax owed.
“Alternatively, should the nil-rate band of £325,000 be reduced, a tax levy at 40 percent will apply to the inheritance of a deceased married couple’s children.
“No matter which of these elements of Inheritance Tax are targeted, many individuals and families will be hugely affected.”
Ms Davis also addressed the potential for a change to Capital Gains Tax.
“An increase in Capital Gains Tax, could mean a large reduction in profit on the sale or transfer of capital assets,” she said.
“For those who have been planning on selling or passing on their estates for some time, this could cause a variety of financial issues.
“It might seem that a change to these taxes will only create problems for the wealthy, but this isn’t strictly true.
“Anyone who owns their own home and has a level of savings could well find themselves impacted, making them less able to pass on their assets to their children in future.
“To mitigate these impacts, lifetime gifts made now either directly or into a trust could offer some protection.
“People should also ensure they have properly structured wills that provide the flexibility to move with changes in tax legislation.”
Meanwhile, Rachael Griffin, tax and financial planning expert at Quilter, told Express.co.uk: “The government does not currently make a huge amount of money on Inheritance Tax as relatively few estates pay the levy.
“Combined with Capital Gains Tax, these taxes only account for around five percent of total HMRC receipts.
“Sunak could generate IHT revenue by scrapping the residence nil-rate band, which has come under fire for being too complicated, or lower the threshold. Both would be drastic measures and it is unclear how much revenue they would generate.
“Last year the All Party Parliamentary Group on inheritance called for a complete overhaul of the system to lower the headline level rate of IHT to 10 percent, but expand the number of people that pay it.
“The government could revisit this proposal and seek to expand the number of estates liable for some IHT, but reduce the headline rate as a makeweight with disgruntled voters.”
Sharing her thoughts on what could happen in terms of CGT, she continued: “Capital Gains Tax is unlikely to be a big earner for the government.
“In the 2017/18 tax year just 260,000 people paid the tax. However, if the government is looking for small wins this may indeed feature and we could see an equalisation of rates paid on capital gains to rates paid on income tax, or by reducing the annual allowance.”