Households can expect a wide range of tax changes in the future, as the government is set to reveal new policies and consultations on March 23rd. In what’s been dubbed as “tax day”, expected changes range from a pensions relief shake-up to reduced red tape for bereaved families. The majority is expected to be about the technical administration of tax, but Chancellor Rishi Sunak could also lay the groundwork for future changes. Below are the potential changes to be announced:

1) Online sales tax update: There have been a lot of reports about the Chancellor planning to introduce an online sales tax. Under the plan, a 2% charge could be added to all goods bought online in the UK.

2) Changes to inheritance tax: The government is also set to make changes to the inheritance tax red tape, which forces bereaved families to needlessly fill out tax forms. Currently, estates that don’t need to pay inheritance tax are still required to fill in HMRC pre-probate forms. However, the government is set to change the rules and remove the requirement for more than 90% of non-tax paying families.

3) Pension boost for lower earners: Workers may see changes to the way tax relief is given on pension savings. Around 1.5 million workers currently get no automatic tax relief on their pension savings, due to earning below the £12,500 personal allowance. Instead their payroll deducts the contributions before any tax is calculated, meaning they miss out on a 20% subsidy from the taxman. The Treasury has previously proposed to fix this for all workplace schemes by requiring pension providers to collect the 20% subsidy from HMRC and add it to the member’s pot. This would mean that even if a member does not pay income tax, they still get the 20% uplift to their savings, which is good news for lower earners.

4) Slashed tax relief for higher earners: higher rate taxpayers currently get their pension tax relief at the highest rate of tax they pay. If you earn between £50,001 and £150,000, you pay a 40% tax rate while those on yearly salaries of more than £150,000 pay 45% in tax. There are rumours that this relief will be scaled back so savers only get the basic rate, which will leave the 17% of workers who earn more worse off.

5) Pay-as-you-go taxes for freelancers: reports have suggested the government is planning to introduce a new “pay-as-you-go” digital tax system. The system would reportedly see every taxpayer allocated a single digital tax account, which banks, bosses and pension providers update. Freelancers, investors and landlords would pay throughout the year rather than on set deadlines.

6) Bigger taxes on investment profits: Another tax reform that could be announced is changes to the capital gains tax (CGT). In November, the Office for Tax Simplification proposed an increase to CGT rates – which is put on profits – to bring them in line with income tax. It recommended reducing the amount people can make a tax-free profit on, from £12,300 a year to between £2,000 and £4,000. Wealthier savers, those who inherit property, second-home owners, buy-to-let landlords and entrepreneurs who sell their businesses could be among the hardest hit by the proposed tax tweaks.

Please Note: Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of March 2021 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.