The Tax Consultation Tsunami
Less than three weeks after the UK budget announced some tax cheer for home buyers and further COVID-related financial support, the UK government has published over 30 tax updates, consultations and documents.
To save you the effort, I've had a trawl through all the documents to see what's relevant from a personal finance perspective. Here's what you need to know:
Inheritance Tax and Estate Administration
The government has confirmed its commitment to fully digitizing the HM Revenue & Customs' system to deal with inheritance tax (IHT).
The temporary exemption from having physical signatures on IHT forms has been made permanent.
The vast majority (90%) of estates with no IHT to pay will no longer have to report to HMRC.
These measures are welcome on the face of it, but like all these things, I'll reserve judgment until I see the reality. Dealing with a deceased relative or friend's affairs can be stressful and overwhelming, especially if their estate is neither small nor simple. A good family solicitor or licensed probate practitioner can take the strain and help sort everything out.
Kings Court Trust was the winner of Probate Provider of the Year (Large Firms) at The 2019 & 2020 British Wills and Probate Awards, and they help families all over the UK deal with estate administration. They have some fantastic resources on their website that explain what you need to know and do if you are an executor or trustee of someone's estate.
What was not in the publications was any proposal to overhaul the rules and rates of inheritance tax, but I think this is unfinished business, so watch this space.
Tax Avoidance
One of the other proposals published today included a proposed package of measures to clamp down on promoters of tax avoidance schemes and arrangements.
You have nothing to worry about unless you get involved in dodgy and contrived tax schemes. If you know someone who is, perhaps you should let them know that life is likely to get a lot harder for them.
Taxation of The Self-Employed
A review into the taxation of the self-employed will examine whether the timing of tax payments can be improved so that they are more closely aligned with income, rather than the present situation of twice-yearly payments.
It’s not clear at present whether this would be just a monthly tax payment based on the previous tax year, with the ability to reduce or if it would be something more similar to that which applies to employed people.
Business Rates
There will also be a review of business rates, with an invitation for feedback from interested parties. I'm doubtful this will lead to any meaningful reform, but I'm happy to be proved wrong.
Holiday Lets
There will be a change to the criteria for determining whether or not a holiday let qualifies for business rates.
In England, a holiday let is currently liable to pay business rates when the owner declares that they intend to make their property available to let 140 days in the coming year. There is no requirement for business rates treatment to undertake checks that a property is commercially rented out.
Most holiday lets registered for business rates have a rateable value which enables them to qualify for Small Business Rates Relief, and as a result, pay no business rates at all.
The new rule will mean that the property must be let for 140 days a year to qualify for business rates rather than a community charge.
This new rule will push up costs for owners of holiday property that is not let out much. If this affects you or anyone you know, you might need to up your marketing, reduce your prices, or both.
Thankfully this year, with few people likely to holiday abroad, demand for UK holiday homes is expected to be very strong, so meeting the new 140 days let rule for businesses rates treatment should be easier.
Developer Cladding Levy
There is also to be a consultation on a new tax on the largest residential housing developers. The new tax would help pay towards the cost of cladding remediation. Whether this will lead to more extensive and faster compensation for owners of affected properties remains to be seen.
Pension Technical Tax Rules
There will be some technical changes to pension legislation. For example, it should be easier for a member to have their pension scheme settle annual allowance charges from previous tax years by reducing their future pension benefits, known as "scheme pays".
There will also be a review of land and property VAT via a call for evidence. This might well see the VAT treatment of self-build and other new properties change, but you should be okay if you are doing a project in the next tax year.
As well as no changes to the rules and rates of inheritance tax, there was also nothing in the bundle of documents published that proposed:
any changes to the tax treatment of pensions, especially tax relief on contributions
an overhaul of the rules and rates of capital gains tax
major changes to VAT
Work from home allowance
There was confirmation that the simplified claim basis of the work from home tax allowance would continue for 2021/22.
That means you can claim tax relief of £6 a week if you are an employee who is required to work from home by your employer. That's worth £62 for basic rate and £125 for higher rate taxpayers.
Claim by either calling HMRC, online via your tax account or via your 2021/22 tax return.
Conclusion
The government probably doesn't feel it's the right time to start making significant personal tax changes, as we slowly emerge from the pandemic and the economy is still recovering. But be under no illusion, tax changes and increases are guaranteed to come in over the next few years.
You can't control future taxes, but you can, to a greater extent, control your earning, spending, saving and investing decisions. And you can also make use of the various tax incentives currently available to help you build wealth.