logo
Covid-19: Full report on the UK economy and what to expect next
  • 26 June, 2020

More information on future economic measures in the UK, including tax cuts and spending pledges, are expected in the Autumn in the hope that a favourable economic contingency would encourage taxpayers to accept more willingly future tax rises. Meanwhile, it is expected that short-term measures to increase consumption will be published shortly.

Current situation

Some numbers:

  • In April 2020 the UK GDP (Gross Domestic Product) has seen a fall by 20.4%, the worst result which has ever been measured.
  • The UK public sector net debt (PSND) in 2020/2021 is expected to be 95.8% of GDP. Based upon the Sustainable Investment Rule, this number should always remain below 40% of GDP.
  • The public sector net borrowing (PSNB) in 2020/2021 will be almost £300bn.
  • The UK Government has spent more than £100bn in measures to support the economy. Meanwhile, revenue has decreased drastically.
  • As of 31.05.20, 8.7 million of jobs have been furloughed at a cost of £17.5bn.
  • HMRC’s total receipts in April 2020 were £25.9bn lower in comparison to the same month of 2019. Of this, VAT receipts were £13.9bn lower, Income Tax, CGT and NICs were £6.3bn lower and Corporation Tax receipts were £4.1bn lower.

 

Short-term measures to increase consumption

At the current stage, it is hard to say whether the recovery of the UK economy will be immediate (therefore “V-shaped”) or it will take more time (“U-shaped”). Most likely the UK Government will introduce short-term measures to increase spending amongst the consumers in the near future.

These measures could be general or otherwise they could focus on supporting the sectors most hardly hit by the pandemic. Considering that over 50% of the Government’s tax revenue comes from income tax and NICs, it will be definitely a crucial point to save and create jobs.

Some of the measures could be:

  • Exemptions from employer NICs for new employees;
  • Exemptions/reductions in stamp duty land tax (SDLT);
  • Infrastructure projects;
  • Government-funded training schemes;
  • Reductions in VAT – across the board or for particular sectors;
  • Tax incentives for investing in start-ups (particularly tech start-ups).

It is important to notice that all these measures, if introduced, are likely to be temporary.

Future tax rises

It is plausible that there will be an increase in taxes in the UK in the next two years. Let’s briefly discuss which taxes may increase and their consequences:

  • Income Tax Rates: it is very likely that Income Tax Rates will be increased. This is an extremely easy way of collecting more taxes from the taxpayers since it represents more than a quarter of the total tax receipts. However, in order for it to be effective, it will be necessary to increase rates in all tax bands. The calculations are simply explained: an increase of the basic rate from 20% to 21% would mean an increase in Income Tax Revenue of £4.7bn per year, while an increase of the higher rate from 40% to 41% would increase the revenue of only £1bn per year. Finally, if the additional rate were increased from 45% to 46%, that would only guarantee the Government an increase of £105m.
  • NICs: several changes could be made to NICs in order to increase the Government’s revenue. There could be an increase of the rate for higher earners with the introduction of a flat rate of NICs or scrapping the upper-earnings limit. Another option could concern self-employed people earning more than £9,501 per year and it would see an increase of their current NICs set at 9% (while it is set at 12% for employees).
  • Tax on dividends: it is possible that the rates for this tax will be increased in order to match the same for income tax. Therefore, the rate would increase from 32.5% to 40% for the higher rate taxpayers, while it would increase from 38.1% to 45% for additional rate taxpayers.
  • Dividends paid to non-UK tax residents: currently non-UK tax resident individuals do no pay UK income tax on UK dividends. This could change in the future and a withholding tax (subject to the UK’s existing double tax treaties’ terms) could be introduced. It must be said that doing so many would be relieved from this tax anyway.
  • Capital Gain Tax Rates: it is very likely that these rates will be increased in the near future. Currently CGT tax is paid at 20% by higher rate taxpayers on all gains, apart from residential property gains and carried interests, which are taxed at 28%. It is expected that all gains will be charged at 28% sometime in the near future.
  • Corporation Tax Rates: it is quite unlikely that the Government will increase the Corporation Tax Rates since the main goal is to support business growth and investment.
  • Windfall Tax: there is a good chance that a windfall tax will be applied to some businesses or economic sectors which have not suffered excessively from the pandemic. Doing so, the cost of the crisis would be borne by the current taxpayers, who have benefited from the support measures, rather than future taxpayers.
  • Wealth Tax: the probability that a Wealth Tax is introduced in the near future is extremely unlikely. It would only raise an amount of 1% or 2% of the total revenues and it would be very complicated to manage.
  • Tax Reliefs: an increase in the rate of CGT and a restriction or removal of certain CGT or Inheritance Tax (IHT) reliefs is quite probable since it would be very easy to manage and it would guarantee a similar revenue increase than a Wealth Tax. The reliefs with a higher chance to be restricted or abolished are: CGT main residence relief and tax-free uplift on death and IHT reliefs for business and agricultural property. A save of £6bn in the next 5 years could be expected by the Government if the IHT relief for business properties is abolished. Finally, also restrictions on funding pensions or tax-free withdrawals from pensions are a possible option.

 

Contact us at info@well-tax.com if you need to discuss matters regarding your company or your position as a self-employed.

 

 

Photo credit: Julia Solonina

Category: Blog

Post a comment

To post a comment you must be registered. If you are already registered you can login.

Register

Tick this box to indicate that you have read and understood the terms and condition of the Privacy Policy

Privacy Policy

BACKGROUND:

User understands that your privacy is important to you and that you care about how your personal data is used and shared online. We respect and value the privacy of everyone who visits this website, www.well-tax.com (“Our Site”) and will only collect and use personal data in ways that are described here, and in a manner that is consistent with Our obligations and your rights under the law.

Please read this Privacy Policy carefully and ensure that you understand it. Your acceptance of Our Privacy Policy is deemed to occur upon your first use of Our Site. If you do not accept and agree with this Privacy Policy, you must stop using Our Site immediately.

1. Definitions and Interpretation

In this Policy, the following terms shall have the following meanings:

“personal data”

means any and all data that relates to an identifiable person who can be directly or indirectly identified from that data. In this case, it means personal data that you give to Us via Our Site. This definition shall, where applicable, incorporate the definitions provided in the EU Regulation 2016/679 – the General Data Protection Regulation (“GDPR”); and

“We/Us/Our”

means WellTax Limited, a limited company registered in England and Wales under company number 09572130 whose registered address is 402a City Gate House, 246-250 Romford Road, London E7 9HZ.

2. Information About Us

• Our Site is owned and operated by WellTax Limited, a limited company registered in England and Wales under company number 09572130 whose registered address is 402a City Gate House, 246-250 Romford Road, London E7 9HZ.

• Our VAT number is GB 221 1287 52.

• Our Data Protection Officer is WellTax Limited and can be contacted by email at info@well-tax.com, by telephone on +44 (0) 20 3581 1717, or by post at https://well-tax.com/contact.

• We are regulated by the ICO (Information Commissioner’s Office, https://ico.org.uk/).

3. What Does This Policy Cover?

This Privacy Policy applies only to your use of Our Site. Our Site may contain links to other websites. Please note that We have no control over how your data is collected, stored, or used by other websites and We advise you to check the privacy policies of any such websites before providing any data to them.

4. Your Rights

• As a data subject, you have the following rights under the GDPR, which this Policy and Our use of personal data have been designed to uphold:

• The right to be informed about Our collection and use of personal data;

• The right of access to the personal data We hold about you (see section 12);

• The right to rectification if any personal data We hold about you is inaccurate or incomplete (please contact Us using the details in section 13);

• The right to be forgotten – i.e. the right to ask Us to delete any personal data We hold about you (We only hold your personal data for a limited time, as explained in section 6 but if you would like Us to delete it sooner, please contact Us using the details in section 13);

• The right to restrict (i.e. prevent) the processing of your personal data;

• The right to data portability (obtaining a copy of your personal data to re-use with another service or organisation);

• The right to object to Us using your personal data for particular purposes; and

• Rights with respect to automated decision making and profiling.

• If you have any cause for complaint about Our use of your personal data, please contact Us using the details provided in section 13 and We will do Our best to solve the problem for you. If We are unable to help, you also have the right to lodge a complaint with the UK’s supervisory authority, the Information Commissioner’s Office.

• For further information about your rights, please contact the Information Commissioner’s Office or your local Citizens Advice Bureau.

5. What Data Do We Collect?

Depending upon your use of Our Site, We may collect some or all of the following personal data:

• name;

• date of birth;

• gender;

• business/company name;

• job title;

• profession and studies;

• contact information such as email addresses and telephone numbers;

• demographic information such as post code, preferences, and interests;

• IP address;

• web browser type and version;

• operating system;

• a list of URLs starting with a referring site, your activity on Our Site, and the site you exit to;

6. How Do We Use Your Data?

• All personal data is processed and stored securely, for no longer than is necessary in light of the reason(s) for which it was first collected. We will comply with Our obligations and safeguard your rights under the GDPR at all times. For more details on security see section 7, below.

• Our use of your personal data will always have a lawful basis, either because it is necessary for Our performance of a contract with you, because you have consented to Our use of your personal data (e.g. by subscribing to emails), or because it is in Our legitimate interests. Specifically, We may use your data for the following purposes:

• Supplying Our services to you (please note that We require your personal data in order to enter into a contract with you);

• Personalising and tailoring Our services for you;

• Replying to emails from you;

• Supplying you with emails that you have opted into (you may unsubscribe or opt-out at any time by sending an email to info@well-tax.com specifying that you no longer want us to keep your data;

• Market research;

• With your permission and/or where permitted by law, We may also use your data for marketing purposes which may include contacting you by email, telephone, text message, and post with information, news, and offers on Our services. We will not, however, send you any unsolicited marketing or spam and will take all reasonable steps to ensure that We fully protect your rights and comply with Our obligations under GDPR and the Privacy and Electronic Communications (EC Directive) Regulations 2003.

• You have the right to withdraw your consent to Us using your personal data at any time, and to request that We delete it.

• We do not keep your personal data for any longer than is necessary in light of the reason(s) for which it was first collected. Data will therefore be retained for the following periods (or its retention will be determined on the following bases):

• In the “Newsletter Section” data will be kept for an unlimited period, however, an unsubscribe option will be available for the individual that would like to opt out.

• In the “Post a Comment Section” data will be kept for an unlimited period, however, the individual could always unsubscribe by sending an email to info@well-tax.com.

• In the “Contact Us”, “Get in Touch” and “Careers” section data will be kept for two years, allowing Welltax Limited to have a reasonable amount of time to contact potential customers and employees.

7. How and Where Do We Store Your Data?

• We only keep your personal data for as long as We need to in order to use it as described above in section 6, and/or for as long as We have your permission to keep it.

• Your data will only be stored in the UK.

• Data security is very important to Us, and to protect your data We have taken suitable measures to safeguard and secure data collected through Our Site.

• Steps We take to secure and protect your data include:

• Encrypted Hard Disc Data

• Website Control Panel locked with password

8. Do We Share Your Data?

• Subject to section 8.2, We will not share any of your data with any third parties for any purposes.

• In certain circumstances, We may be legally required to share certain data held by Us, which may include your personal data, for example, where We are involved in legal proceedings, where We are complying with legal obligations, a court order, or a governmental authority.

9. What Happens If Our Business Changes Hands?

• We may, from time to time, expand or reduce Our business and this may involve the sale and/or the transfer of control of all or part of Our business. Any personal data that you have provided will, where it is relevant to any part of Our business that is being transferred, be transferred along with that part and the new owner or newly controlling party will, under the terms of this Privacy Policy, be permitted to use that data only for the same purposes for which it was originally collected by Us.

• In the event that any of your data is to be transferred in such a manner, you will not be contacted in advance and informed of the changes.

10. How Can You Control Your Data?

• In addition to your rights under the GDPR, set out in section 4, when you submit personal data via Our Site, we aim to give you strong controls on Our use of your data for direct marketing purposes (including the ability to opt-out of receiving emails from Us which you may do by unsubscribing using the links provided in Our emails and at the point of providing your details).

• You may also wish to sign up to one or more of the preference services operating in the UK: The Telephone Preference Service (“the TPS”), the Corporate Telephone Preference Service (“the CTPS”), and the Mailing Preference Service (“the MPS”). These may help to prevent you receiving unsolicited marketing. Please note, however, that these services will not prevent you from receiving marketing communications that you have consented to receiving.

11. Your Right to Withhold Information

You may access certain areas of Our Site without providing any data at all. However, to use all features and functions available on Our Site you may be required to submit or allow for the collection of certain data.

12. How Can You Access Your Data?

You have the right to ask for a copy of any of your personal data held by Us (where such data is held). Under the GDPR, no fee is payable and We will provide any and all information in response to your request free of charge. Please contact Us for more details at info@well-tax.com, or using the contact details below in section 13.

13. Contacting Us

If you have any questions about Our Site or this Privacy Policy, please contact Us by email at info@well-tax.com, by telephone on +44 (0) 20 3581 1717, or by post at https://well-tax.com/contact. Please ensure that your query is clear, particularly if it is a request for information about the data We hold about you (as under section 12, above).

14. Changes to Our Privacy Policy

We may change this Privacy Policy from time to time (for example, if the law changes). Any changes will be immediately posted on Our Site and you will be deemed to have accepted the terms of the Privacy Policy on your first use of Our Site following the alterations. We recommend that you check this page regularly to keep up-to-date.

Login
Let us keep you updated with our Newsletter