personal finance

How could taxes rise? Your questions answered



Of all the uncertainties caused by the Covid-19 pandemic, one thing feels beyond doubt — at some point, taxes are going to have to rise.

But the bigger questions are when, where and by how much?

The surge in public spending combined with the impact of the coming recession on future tax receipts is predicted to result in a budget deficit exceeding £337bn. Increasing government borrowing could cover much of the shortfall, but experts believe some tax rises are inevitable.

Last week, a leaked Treasury document showed the government is already considering breaking election manifesto pledges not to raise income tax, national insurance or VAT, and could even scrap the ‘triple lock’ on the state pension.

But could chancellor Rishi Sunak be tempted to go further, and use the pandemic as cover for enacting wider reforms to the British tax system that have long eluded his predecessors?

The taxation of the UK’s 5m self-employed has already been marked out by the chancellor as an area he wants to reform, in return for granting financial support. However, this is a fiendishly tricky area of taxation, as attempts to overhaul IR35 rules have shown.

Experts foresee a much wider shake-up of national insurance contributions, with implications for employers and employees.

Billions of pounds of revenue could be raised from scrapping higher rate pensions tax relief — something that was on the government’s agenda before the pandemic.

And could some taxes be tweaked to encourage the economic recovery — such as cutting stamp duty land tax to boost the property market?

View the video in the story above for our experts’ answers on this subject, watch via the FT’s YouTube channel or LinkedIn page.



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