One of the challenges of every professional adviser is to try to separate their views from the requirement to give dispassionate and objective advice.
So, in the next few months I will undoubtedly be lecturing and giving advice on how to plan for higher taxes whilst believing that this strategy would be a mistake.
Even before the pandemic, the UK tax burden as a percentage of the economy was the highest that it had been for 40 years. I believe that we are approaching the point where not only will taxes create an additional drag on an already enfeebled economy but also that they will not help in repairing the public finances.
Stamp duties have been raised. The top rate is now 15% and due to go up to 17% next year for non-residents buying UK property. This has resulted in a slowdown in the market which may well have cost the UK Treasury in terms of taxes not raised.
The ordinary worker already faces a marginal tax and national insurance rate of 32%. When you add the compulsory pension contribution this rises to 36%.
Capital taxes have never raised large amounts and I cannot see them making a meaningful contribution toward balancing the books. Raising them could however seriously affect the incentives for entrepreneurs to take risks and for families to take a long-term view of their finances.
We saw with the difficulties created for the NHS when pension tax relief was limited that Consultants were reluctant to take on extra duties because they faced marginal tax rates of above 100%.
Despite all this, there is a strong possibility that taxes will rise and therefore clients need to be advised of the best strategies to deal with what could be a very difficult tax environment. It is a bit like the weather; you may not like the rain but it makes sense to wear a coat and carry an umbrella if the outlook looks stormy.
Primondell will be running a number of seminars in the run up to the anticipated Spring Budget in 2021.