The biggest tax-raising parliament since records began
The Institute for Fiscal Studies (IFS) has stated that this has been the biggest tax-raising parliament since records began, pushing UK tax revenues to historically high levels. They comment “At the time of the last general election, UK tax revenues amounted to around 33% of national income. By the time of the next election in 2024, on current forecasts, taxes will amount to around 37% of national income – a level not sustained in the post-war period.” Compared with a world in which taxes had stayed at 33% of national income, the UK government will be raising upwards of £100 billion more in tax revenues next year. This is equivalent to around £3,500 more per household, though of course the tax rise will not be shared equally.
The government may decide to announce tax cuts in the run-up to the next election. But there is no world in which this parliament – or indeed the period since Rishi Sunak became Prime Minister – turns out to be anything other than a tax-raising one. In fact, it is currently on track to be the biggest tax-increasing parliament since comparable records began.
The UK government is currently raising more in tax revenue, as a percentage of national income, than at any time since the 1940s. This is, in no small part, due to a raft of tax-raising measures announced over the past few years. Notable examples include the big increase in the main rate of corporation tax from 19% to 25%, the energy profits levy, and freezes to various income tax and National Insurance thresholds. Economic developments mean that some of these measures will now raise considerably more than originally planned or intended. That is particularly true to freezes to income tax allowances (which would otherwise have risen in line with inflation).
What are the tax planning opportunities ahead of the new tax year?
The new tax year starts 6 April 2024, so you have six months to consider your planning options. Once we pass this date the majority of the tax planning options for Income Tax and Capital Gains Tax purposes will cease unless actioned.
If you fall into any of these categories, we can help you by discussing your options ahead of the April 2024 deadline:
- You have or are thinking about a change in your personal status (single, married, separating, joining or dissolving a civil partnership).
- You are thinking about selling a capital asset, such as shares or a property.
- You or your child’s other parent claims Child Benefit and the income of either parent is likely to exceed £50,000 for the first time during tax year 2023-24.
- Your annual income is approaching or above £100,000.
- You have not yet topped up your pension contributions for tax year 2023-24.
- You are self-employed with a 31 March 2024 year-end.
- You are thinking about the purchase of equipment or vehicles.
- You are the director and/or shareholder of a limited company and have not yet considered voting dividends or bonuses for 2023-24.