• news-banner

    Expert Insights

Spring Statement: Act now before it's too late

As expected, the biggest issue of the day – the situation in Ukraine and the knock-on impact this is having on the UK economy’s recovery from the Covid-19 pandemic and contribution to the cost of living crisis – was a key focus of Rishi Sunak’s Spring Statement today. Also, as expected, it was silent on announcements of any changes to the rules, thresholds and/or reliefs of the capital taxes (capital gains tax and inheritance tax) following reviews and consultations which had taken place in 2020 and after the speculation of potential changes last spring and autumn.

Indeed major tweaks to such taxes appear to be put on hold for the time being, given the risk that the existing headroom against the Chancellor’s fiscal targets (the OBR estimates around £30bn) could be wiped out by relatively small changes in economic outlook, according to the Office for Budget Responsibility. However, it would be wise not to rule out such changes, in case these are targeted as a means of adding to the Treasury’s coffers. This is particularly the case with the Chancellor’s self-imposed fiscal rules in mind, and him being wary of servicing any further Government borrowing (against the backdrop of increasing interest rates), together with a focus on increasing public spending and investment. It is also worth noting that Shadow Chancellor, Rachel Reeves, highlighted the Chancellor’s failure to increase rates of capital gains tax.

The main “rabbit out of the hat” in a statement clearly focused on presenting himself as a tax-cutting Chancellor (after having been compared to Gordon Brown last autumn) was a pledge to cut the basic rate of income tax from 20% to 19% in 2024 (when inflation/debt is expected to be lower with higher growth and also, handily, possibly right in time for the next General Election). It is claimed that this will be a tax cut of £5 billion for over 30 million people.

In keeping with that overriding theme, a “Tax Plan” has been promised to herald a principled approach to cutting taxes over the Parliament and create conditions for growth. A first version of this was published shortly after the Chancellor had given his statement [Read the Tax Plan], but it remains to be seen what further detail/iterations will follow and whether indeed such plans will be possible to implement (particularly at such a volatile time).

Whilst a cut in the basic rate of income tax is indeed welcome, it is difficult to see where the money will come from, particularly with no indication of an increase to rates of capital gains tax (such as aligning them with income tax rates, for instance, as was speculated last year). We suspect that the Chancellor may be relying on fiscal drag from the last Budget, especially with inflation rising, and given the better-than-expected headroom (see above). However, this pledge (as well as the wider promise to cut taxes) may mean that rather than there being increases to the headline rates of the capital taxes, there is a tinkering around the edges, such as more reliefs being removed or limited (such as business property relief / agricultural property relief on inheritance tax). This would be in keeping with previous moves made by this Chancellor, such as the introduction of the far more limited business asset disposal relief in place of entrepreneurs’ relief announced in his first Budget of March 2020. We would therefore encourage individuals to consider planning to make the most of such reliefs whilst they are still available and in advance of the Budget in the autumn.

Whilst the new NICS levy in April of 1.25% (announced last year) is still going ahead, and deemed necessary for funding the NHS and social care, further measures to help households were announced, including an increase of the threshold at which NICS are payable (to align with the income tax allowance of £12,500) and a 5p cut in fuel duty. However, this is notably not quite as generous as our neighbours in Europe (where it was cut by 12p in France and by 17p in Ireland, for instance, or tailored to tax bands as in Portugal).

In terms of taxes on businesses, there will be an increase of employment allowance to £5,000 for small businesses, and tax credits around research and development and tax rates on business investment to be cut (with more detail to follow in the Budget in the autumn).

This Spring Statement was therefore less of an anti-climax than the Autumn Budget for the private wealth industry given it proceeded largely as expected – but it has provided further confirmation that individuals can continue to benefit from relatively favourable tax regimes (particularly with the reliefs that exist at present and which may be vulnerable to limitation/extinction) with an increased level of certainty, creating a golden opportunity for longer-term tax and estate planning. No doubt this will be music to many people’s ears given the commodity of certainty has been in such short supply over the last few years.

For instance, if inflation continues to rise, and does not fall as the Office for Budget Responsibility predict, there may be changes to the thresholds for inheritance tax (or reliefs), given the increasing number of families paying this unpopular tax. All the more reason to consider what lifetime gifting one might be able to put into place at current rates, whilst one still can.

Our thinking

  • IBA Annual Conference 2023

    Charlotte Ford

    Events

  • A Labour government: what might be in store for personal taxation?

    Sarah Wray

    Quick Reads

  • China Daily, and other titles, quote Silvia On on trends affecting Chinese HNWIs

    Silvia On

    In the Press

  • New Hong Kong crypto regime: trading platforms falling foul already?

    Patrick Chan

    Insights

  • Investment Week quotes Julia Cox on the proposed scrapping of inheritance tax

    Julia Cox

    In the Press

  • Heritage property and conditional exemption

    Sarah Wray

    Insights

  • Vanessa Duff writes for Wealth Briefing on how the Bank of Mum and Dad can help young people get on the property ladder

    Vanessa Duff

    In the Press

  • Sarah Higgins and David Wells-Cole write for Wealth Briefing on the pitfalls of using unregulated legal services

    Sarah Higgins

    In the Press

  • 5 top tips to make estate administration easier for your executor

    Jessica Dawkins

    Quick Reads

  • Financial Reporter quotes Rhys Novak on a new FCA review into the treatment of PEPs

    Rhys Novak

    In the Press

  • South China Morning Post quotes Lisa Wong on Hong Kong's surrogacy rules

    Lisa Wong

    In the Press

  • First time buyers relief and trusts

    Sarah Wray

    Insights

  • The Financial Times quotes Julia Cox on tax planning under a potential Labour government

    Julia Cox

    In the Press

  • The Times quotes Suzanne Marriott on the legal ramifications of stolen artefacts

    Suzanne Marriott

    In the Press

  • The Family Fund: Bank of Mum & Dad 2.0

    Vanessa Duff

    Quick Reads

  • The Financial Times quotes James Riby on London’s reputation as ‘divorce capital’ of the world

    James Riby

    In the Press

  • Inside Britney and Sam’s $10m prenup

    Shivi Rajput

    Quick Reads

  • The i quotes Katie Talbot on the merits of putting a life insurance policy into a trust

    Katie Talbot

    In the Press

  • Oops!....I did it again - Britney's third divorce

    Charlotte Posnansky

    Quick Reads

  • NSPCC urges Government to protect children from domestic abuse during holidays

    Shivi Rajput

    Quick Reads

  • A brief look at HMRC v A Taxpayer [2023] UKUT 00182 (TCC)

    Dominic Lawrance

    Quick Reads

  • An exceptionally harsh judgment? Exceptional circumstances revisited

    Dominic Lawrance

    Insights

  • Record success for Charles Russell Speechlys in Chambers High Net Worth 2023 directory

    Piers Master

    News

  • ATED and the farmhouse

    Sarah Wray

    Quick Reads

  • Recognising financial abuse in a relationship

    Vanessa Duff

    Quick Reads

  • Million Dollar Footballer With No Assets?

    David Carver

    Quick Reads

  • eprivateclient quotes Sarah Higgins and David Wells-Cole on the CMA’s investigation into will-writing and quickie divorce legal services

    Sarah Higgins

    In the Press

  • Domestic abuse orders: worth the paper they’re written on?

    Lydia Hutchinson

    Insights

  • Parental responsibility as a form of coercive control

    Lydia Hutchinson

    Insights

  • Sally Ashford and Oliver Auld write for International Adviser on the role of a trustee in a family trust

    Sally Ashford

    In the Press

  • Are Parental Rights Equal for All Families?

    Vanessa Duff

    Quick Reads

  • Atonement and post separation endeavour: wife keeps £1m gift from husband after his affair and will receive a share of his business’ future profits

    Sophia Leeder

    Quick Reads

  • Pensions: change is in the air once again

    Sarah Wray

    Quick Reads

  • Pre-Settled Status to be automatically extended by two years

    Paul McCarthy

    Quick Reads

  • Don’t push it… Quincecare duty clarified

    Caroline Greenwell

    Quick Reads

  • Pandora Papers: HMRC nudge taxpayers to come out of their box

    Hugh Gunson

    Quick Reads

  • Making BitCoin a BitClearer

    Charlotte Posnansky

    Quick Reads

  • Can a financial claim in divorce proceed after the death of either party?

    Sarah Higgins

    Quick Reads

  • Second Time Weddings - Family Law (I) dos and don’ts

    Miranda Fisher

    Quick Reads

  • Tina Turner: an inspiration praised for turning the tables on domestic violence

    Matt Foster

    Quick Reads

Back to top