The UK is in the midst of an economic crisis as a result of the coronavirus pandemic, putting the country in a double dip recession. The concerning state of the economy was once again highlighted recently as the national debt jumped to more than £2trillion. The budget deficit – the annual shortfall between spending and tax income – is expected to reach more than £400billion this year. This has led many to question how Chancellor Rishi Sunak will look to revive the economy, with many fearing imminent tax hikes.
Mr Sunak has not yet revealed what tax policies he intends to change.
Last month he refused to reveal any information on incoming changes, saying current levels of spending were “unsustainable”.
When asked if the tax lock still applied, he added: “I’m not going to be drawn on future fiscal policy.”
A recent report published by the Office of Tax Simplification, commissioned by Mr Sunak, suggested rises in capital gains tax which could impact inheritance duties.
But, as experts have highlighted, the number of families charged inheritance tax on gifts has climbed for three years in a row, and many are falling foul of the complex rules.
Last week, the Office for Budget Responsibility projected that the number of estates subject to the duties will rise after the pandemic from 25,200 in 2019/20 to 30,400 in 2020/2021.
Becky O’Connor, head of pensions and savings at Interactive Investor, a platform, told the Financial Times: “Many families of older UK people who died from coronavirus could now face unexpected inheritance tax bills on their estates. Many of those who died unexpectedly will not have had time to plan their affairs.”
Zena Hanks, partner at accountancy firm Saffery Champness, has also warned of “hefty tax bills” due to a misunderstanding of the rules.
She added: “Many individuals who make gifts during their lifetime are unaware of the various available allowances and exemptions, let alone that their gifts could end up coming back to bite their beneficiaries in the form of a hefty tax bill.”
Mr Sunak has faced opposition from many within his own party over potential tax hike plans.
One Tory MP told the Sunday Telegraph in October: “Self-employed workers have had a pretty rough deal and the idea that Sunak would now choose to make it even tougher for them seems perverse.
“Most people do not like the Treasury’s continual and institutional obsession with increasing tax on self-employed people.”
The MP also warned of a “huge rebellion” if the plans were put in place and added that “most people do not like the Treasury’s continual and institutional obsession with increasing tax on self-employed people”.
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Richard Murphy of Tax Research UK warned against tax increases in an interview with Express.co.uk earlier this year.
He said: “At first, Rishi Sunak completely underestimated what was going to happen, it was a complete disaster, because he hadn’t realised how disastrous coronavirus was going to be.
“But he was back a week later with the furlough scheme, it was smart, quick, some people lost out when they shouldn’t have done.
“Now Sunak’s obsession with debt is kicking in again.
“If he opts for austerity and tax hikes, then frankly we are heading for depression rather than a recession.”