Taxing times set to continue for wealthy individuals

17 November 2015

Gary Heynes

The Government is likely to have a shortfall on expected revenues next year; the Chancellor won’t be able to save the full £4.4bn on tax credit changes and may well decide he needs to raise taxes to balance the books.

High-income individuals have been hard hit on tax changes in recent years and there are still a few generous reliefs which could be 'reformed' – in other words changed in order to collect more tax.

These could include:

Entrepreneurs relief – the £10m relief is arguably more than generous for the average business owner realising the value of their hard work. A reduction to £5m may be considered still more than sufficient for the majority. There could also be further tightening of the rules.

Business property relief – this currently gives an unlimited exemption from inheritance tax for the value of a trading business or shares in a trading company on the death of the owner/shareholder. This can exempt large values from 40 per cent inheritance tax and a tinkering of the rules could result in a reduced exemption (say 50 per cent) or the value of the relief being limited to a fixed amount.

Pensions tax relief – significant changes have already been announced for high earners which will see a big reduction in the relief available from April 2016 for those earning more than £150,000. However, the Government has promised a more wide ranging review of the pension relief rules and we could see further changes announced here. Pensions are, by their very nature, a long term savings plan and therefore need to have some certainty around their rules, but the history of changes doesn’t bode well for this notion.

Non-doms – another group who have been hit hard with tax changes in recent years, will see the next phase of changes to their regime announced following the Summer Budget. There will be much more detail added in the coming months given the proposed upheaval of the rules from April 2017, but we hope further clarity will be provided in the Autumn Statement, although only a short period after the consultation in this area finished.

If do we see changes to any of the issues above, then it will be unsettling for those who currently contribute the highest share of taxes. Some of the above will be necessary for political reasons, and on this occasion, for economic plugging of holes.


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